Economic Agents and Their Roles in a Simple Economy

Economic Agents and Their Roles

Item 2: Operators

Producers who supply goods or services in exchange for money receive them. Consumers are those who consume goods or services offered by the producers in exchange for money. In a simple economy, all economic transactions will always occur between households.

Companies

The company provides property, which will be units of domestic consumption, and in turn, inputs. Its main function is to produce. The objective is the maximization of profit, which is achieved by increasing the distance between production costs and revenues collected from sales.

Create the value added to existing productive factors, which increases the units of these factors by combining them in a controlled and coordinated manner to obtain goods and services demanded. The company will be responsible for providing the goods and services that society needs.

Families

The family has the primary function of consuming goods or services to meet their needs. Primaries for survival (food). High society depends on how the family unfolds.

Public Sector

The public sector acts as a regulator and targets different administrations to get the maximum level of well-being for individuals of a society (public administrations, businesses, and public social security systems).

The functions are:

• Prosecutor: The public sector obtains revenue streams to finance the most important form of collective fund taxes.
• Regulatory: Fixed legal standards governing the operation should be subject to all agents.
• Stabilizing: Regulates economic developments.
• Redistributive: Reduces socioeconomic differences between the different members of society and ensures a minimum level of well-being.
• Provision of public goods and services: Useful goods in general.

Kinds of Assets According to Needs

• Free goods: Not useful to consumers, are scarce, nobody can take possession of them, limited and scarce.
• Economic assets: Are depleted. Within these:
  • Consumer goods: Ready for consumption, respond to specific economic needs.
  • Capital goods: Production methods of other goods.
• Public goods: Susceptible of being used for an indefinite period by all citizens through individual or collective ownership.

Three Major Problems of the Economy

Produce optimally to maximize the satisfaction of the different needs.

Questions

What and how much to produce?

The market or production patterns set these demands, posing a specific need in terms of quantity or quality that firms must consider.

How to produce?

Election by the employer of the most efficient techniques and proper allocation of limited factors of each economic system.

Objectives:

• Minimize the costs of the company.
• Maximize consumer satisfaction.
• Efficiency in the use of production factors.

For whom to produce?

Should be addressed to a particular type of consumer with specific needs, with a certain quality, quantity, and price.

Opportunity cost is the best choice that should be abandoned in order to have a particular good.