Economic Activity, Production & Market Economy Essentials
1. Economic Activity
Economic activity is the set of activities performed by humans to meet needs. Once goods are produced, they are distributed and sold.
Production
Production consists of combining natural resources, technology, and labor to obtain goods or services for consumption by people. Examples include consumption goods (clothing, furniture) and production goods (machines, tools).
Commercialization
Commercialization consists of the distribution and sale of goods and services. There are two stages: wholesale and retail.
2. Natural Resources, Work and Surplus
Natural Resources
Natural resources are materials provided by nature that humans transform to produce goods. They are one of the most important sources for production, although they are scarce.
Work (Labor)
Work is any activity that serves to produce goods or provide services useful to people. The most common type is employed work, although self-employment is also used.
Surplus
Surplus is the remaining part of the production of a product after meeting immediate needs.
3. Market Economy
Market Economy Concept
The market economy is the predominant economic system in the world today. The fundamental idea is that only through the free play of supply and demand are resources allocated and prices determined fairly.
Market, Sellers and Buyers
The market is the place—physical or virtual—where goods and services are bought and sold. It brings together sellers and buyers.
Price
Price depends on the quantity of products available (supply) and the number of buyers (demand).
Law of Supply and Demand
The law of supply and demand explains how the interaction of sellers and buyers determines satisfactory pricing of goods and services.
Publicity and Advertising
Publicity (advertising) is necessary to publicize products and inform potential buyers.
4. Economic Agents
Economic agents are persons, groups, or institutions involved in the economy.
Families (Households)
Families (households) allocate part of their economic resources to purchase goods and services.
Enterprises
Enterprises are the principal agents of production and distribution. An enterprise is an economic unit that, through labor and capital, produces and distributes goods and services. Enterprises are classified by size—multinational, medium, or small—and by sector: primary, secondary, or tertiary.
State (Public Sector)
State refers to the set of economic and social activities conducted by government funded by taxes and public funds. Typical roles include: maintaining public administration; promoting economic activity and social relations; providing public services; and delivering social benefits.