A good is a physical item you can touch, like a loaf of bread or a phone. A service is a task performed by someone for you, like a haircut or a bus ride. Trade is the exchange of goods and services, often for money — people specialise in producing certain things and trade for what they don't make themselves, which is usually more efficient than everyone trying to make everything.
Example
A baker produces bread (a good) and sells it for money, then uses that money to pay a plumber (a service) to fix a leaking tap — neither the baker nor the plumber needs to do both jobs themselves.
Key terms
Good:
A physical item that can be bought or sold.
Service:
A task performed for someone, rather than a physical item.
Trade:
The exchange of goods and services, often for money.
Questions
1. A loaf of bread is an example of a:
Good
Service
Law
Rule
2. A haircut is an example of a:
Good
Service
Law
Tax
3. Trade means:
Exchanging goods and services
Making laws
Voting
Farming only
4. A phone is an example of a:
Good
Service
Rule
Citizen
5. A bus ride is an example of a:
Good
Service
Law
Tax
6. People who make or provide goods and services are called:
Producers
Governments only
Citizens only
Laws
7. People who buy and use goods and services are called:
Consumers
Producers only
Pharaohs
Citizens only, never consumers
8. Why do people trade instead of making everything themselves?
It is usually more efficient to specialise and exchange
It is required by law everywhere
Trading is illegal otherwise
People enjoy wasting time
9. A baker selling bread and using the money to pay a plumber is an example of:
Trade of goods and services
A law being broken
A rule at school
Citizenship only
10. Which of these is a service, not a good?
Car repair
A loaf of bread
A television
A pair of shoes
11. Specialising in producing one type of good or service usually leads to:
Greater efficiency and skill in that area
Less skill overall
No benefit at all
Everyone doing the same job
12. International trade between countries involves exchanging:
Goods and services across borders
Only laws
Only citizenship
Nothing of value
13. A farmer growing wheat and trading it for tools made by another producer illustrates:
Specialisation and trade
A law being made
A rule at school
Mummification
14. Money is mainly used in trade to:
Make exchanging goods and services easier than direct swapping
Replace all goods and services entirely
Make trade illegal
Serve no functional purpose
15. Why might a country import goods it could technically produce itself?
It may be cheaper or more efficient to buy from a country that specialises in it
Imports are always illegal
Countries are required to import everything
It has no economic reasoning behind it
16. Which best explains the concept of "opportunity cost" when a country chooses to produce one good instead of another?
The value of the next best alternative given up by that choice
The exact price paid in a shop
A type of law
A tax on services only
17. A country with abundant farmland but few factories would likely benefit most from trading by:
Exporting agricultural goods and importing manufactured goods
Refusing to trade with any other country
Building factories instead of farming, always
Ignoring its natural resources entirely
18. Why can trade between countries sometimes create economic interdependence?
Countries come to rely on each other for goods or services they don't produce themselves
Trade never affects a country's economy
All countries produce identical things
Interdependence is impossible between nations
19. A local economy where everyone only produces for themselves, with no trade, is likely to be:
Less efficient than one with specialisation and trade
More efficient than any trading economy
Identical in efficiency to a trading economy
Unaffected by lack of trade
20. Which scenario best illustrates a service industry contributing to an economy?
A city full of teachers, doctors and hairdressers providing services for payment
A factory producing cars
A farm growing wheat
A mine extracting iron ore
21. A shortage of a good (like a poor wheat harvest) typically causes its price to:
Rise, since supply has decreased relative to demand
Fall automatically
Stay exactly the same always
Have no relationship to price at all
Answer key (parent copy)
1. Good
2. Service
3. Exchanging goods and services
4. Good
5. Service
6. Producers
7. Consumers
8. It is usually more efficient to specialise and exchange
9. Trade of goods and services
10. Car repair
11. Greater efficiency and skill in that area
12. Goods and services across borders
13. Specialisation and trade
14. Make exchanging goods and services easier than direct swapping
15. It may be cheaper or more efficient to buy from a country that specialises in it
16. The value of the next best alternative given up by that choice
17. Exporting agricultural goods and importing manufactured goods
18. Countries come to rely on each other for goods or services they don't produce themselves
19. Less efficient than one with specialisation and trade
20. A city full of teachers, doctors and hairdressers providing services for payment
21. Rise, since supply has decreased relative to demand