Understanding Economic Activities: Production, Distribution, and Consumption

Understanding Economic Activities

Economic activity refers to any process by which we obtain the products and services that meet our needs. Economic activities encompass three stages: production, distribution, and consumption.

Benefits, Assets, and Services

A benefit is the result of the difference between revenues and expenditures from economic activity. If expenses exceed revenue, losses will occur.

An asset is any object that fulfills a need and possesses value.

A service is a benefit intended to satisfy a personal or social need, but its production does not result in a tangible object.

Investment and Companies

Investment is the allocation of money intended to start a business or maintain and improve an existing one, with the goal of generating profit.

Companies engage in the production of goods and services to achieve financial gain. Their activities require the labor of individuals (for which they pay salaries) and the purchase of products and services from other companies (e.g., machinery).

Grants and Taxes

A grant is government assistance provided for the development of a business or for social purposes.

A tax is a mandatory payment that individuals and businesses must make to a public body (e.g., the State, a region, or a municipality).

Factors of Production

To produce goods and services, we need the labor of people, natural resources, capital, and a set of technologies and knowledge. These elements are the factors of production.

Discrimination in the Workplace

Women often face discrimination in the workplace. They may receive lower wages than their male counterparts for performing the same job, encounter difficulties in accessing management positions, and, in many developing countries, be denied loans that would enable them to start a business.

The Underground Economy

The underground economy comprises economic activities that are not officially declared and, therefore, operate outside the bounds of legality. It exists in all countries, but is particularly prevalent in underdeveloped nations, often leading to exploitative labor situations.

Types of Capital

All resources that are not natural and are used to produce goods and services are considered capital. We can distinguish three kinds of capital: physical, human, and financial.

Technology in Production

Technology is the set of procedures used to produce goods and services. Based on the technology employed, there are three types of production: manual, mechanized, and technically advanced.