Understanding Economic Activity: Sectors and Factors

Economic Activity

Economic activity is what humans undertake to acquire goods (products and services) that satisfy consumer needs.

Economic Goods

Economic goods are products and services generated by economic activity.

Products

Products are goods obtained directly from nature (e.g., fish) or transformed into something else (e.g., clothes, books). They can be classified by:

• Composition: They can be consumable (durable consumer goods, such as computers, or non-durable, such as pizza) or capital goods (tools).
• Function: They can be intermediate goods (wool produced by a sheep) or finished goods (the shirt made from this wool).
• Ownership: They can be private (belonging to people) or public (belonging to the state).

Factors of Production

Factors of production are the resources required to generate economic goods. They fall into three groups:

Natural Resources

These are resources provided by nature and used by mankind. They are classified as:

• Renewable: solar energy
• Partially renewable: clean air
• Non-renewable: minerals

Human Resources

These are the people who, through their labor, exploit and convert natural resources into economic goods.

Capital

This comprises the material, technical, and financial resources (money) needed to obtain products and provide services.

Economic Agents

Economic agents are elements that convert factors of production into goods and services.

• People and families: Private economic agents forming small production units, generating and consuming goods and services.
• Companies: Also private, but they do not consume the products or services they generate; instead, they sell them for profit in exchange for money.
• The State: It offers services to people and companies, financed by collecting taxes from people, families, and companies.

Economic Sectors

Economic activities are grouped into three sectors: the primary, secondary, and tertiary sectors.

Primary Sector

Activities involved in obtaining resources directly from raw materials, including agriculture, livestock, fishing, forestry, and mining. These are the oldest economic activities.

Secondary Sector

Activities involved in converting raw materials into manufactured products (industry).

Tertiary Sector

Includes activities that provide services, for example, education.