Economic Principles: Needs, Goods, and Business Fundamentals

Core Economic Definitions

An organization is a group of people organized and coordinated to work on a common goal.

A company is an economic unit that processes raw materials to develop products, meeting consumer needs and earning money by selling its products or services.

Economics is the social science that manages resources for all types of work, developing and converting them into goods and services to meet the economic needs of people.

A human need (or necessity) is the feeling of lacking something, a certain discomfort that generates the urge to fulfill what we need.

Business Fundamentals

Elements Involved in Business:

• Factors of Production: Nature, Labor, Capital, Entrepreneurship.

Actors Involved in Business:

• Households
• Companies
• The State

Types of Human Needs

By Origin:

Individual Needs:

• Natural Needs: Related to the conservation of life (e.g., food, clothing).
• Social Needs: Arising from life in society, linked to the customs of a country or region (e.g., mate).

Societal Needs:

• Collective Needs: Arise from individual needs and become part of society (e.g., transportation, food, and shopping).
• Public Needs: Satisfied by the state (e.g., security, health services).

By Nature:

Primary Needs:

• Needs upon which the preservation of human life depends, associated with natural human needs.

Secondary Needs:

• Tend to increase the welfare of the individual and vary with the social or economic conditions of each individual.

By Time of Satisfaction:

Present Needs:

• Satisfaction is immediate (e.g., hunger).

Future Needs:

• Stem from a voluntary or mandatory prediction.

Characteristics of Human Needs

Concurrent Needs:

• A feature where needs can absorb or replace others (e.g., replacing an air conditioning fan).

Complementary Needs:

• Needs that cannot be met separately (e.g., water and soap).

Recurring Needs:

• Needs that recur frequently over time.

Assets

Anything that directly or indirectly satisfies human desires or needs.

Types of Goods

By Character:

Free Goods:

• Limited in number or very large and not owned by anyone (e.g., air, oceans).

Economic Goods:

• Those whose study is concerned with economics.

By Purpose/Requirements:

Capital Goods:

• Do not directly serve human needs; used for the production or distribution of consumer goods.

Durable Capital Goods:

• Can be used multiple times (e.g., machinery, transportation).

Non-Durable Capital Goods:

• Consumed in a single act (e.g., industrial gas, electricity).

Consumer Goods:

• Intended for the direct satisfaction of human needs (e.g., food, toys, etc.).

Durable Consumer Goods:

• Can be used several times (e.g., clothing, appliances).

Non-Durable Consumer Goods:

• Consumed with a single act (e.g., food).

By Level of Processing:

Finished Goods:

• Those that have completed their transformation stage and are able to meet consumer needs or function as capital goods.

Intermediate Goods:

• Those that must undergo further changes before becoming final consumer goods; they lose their identity (e.g., flour to make bread).

Components:

• Completed goods that become part of another good without losing their identity (e.g., shoe laces).

Final Goods:

• Those for which changes have been necessary to make them ready for use (e.g., machines, clothes).

Raw Materials:

• Provided by nature and obtained by humans through extraction.