This chapter aims to provide an introduction to some of the economic issues surrounding the welfare of farmed sheep. Typically, ethical issues, or welfare indicators measured by natural scientists (physiological, physical and behavioural), gain precedence in discussion, and economic aspects are considered to be side issues. Moreover, economics is assumed, by some, to be a means of justifying profit generation at the expense of welfare – which it is not. Economics studies human behaviour as a relationship between ends and scarce means that have alternative uses. It is central to the achievement of acceptable levels of animal welfare, which are identified by the natural scientist and agreed through ethical debate. The actions of a wide range of individuals and groups influence the level of welfare that a sheep can experience during its life. These include farmers, hauliers, slaughtermen, consumers, non-consumers and government. Their roles and interactions are introduced in this chapter by addressing some questions relating to the supply of, and demand for, goods and services such as sheep meat and wool. Practical examples are provided to illustrate points and reference is made to high welfare and organic systems. The potential impact that imposition of high welfare standards may have on the sustainability of businesses within the sheep industry, and consequences for sheep welfare are raised