Economic Activity: Sectors, Agents, and Impact
What is Economic Activity?
People have many needs: food, clothing, housing, medical care, etc. We call economic activity any process by which we obtain the products and services that meet those needs. Economic activities cover three stages: the production of what we need, distribution, and consumption.
The needs and desires of people are infinite, but the means we employ to meet them (raw materials, labor, money, etc.) are limited. So we have to choose what goods and services are produced, in what quantity, by what means, how to distribute products, what percentage of the investment is intended for, etc. Economics is the science that studies all these aspects.
The Economic Sectors
- The primary sector includes efforts to obtain food and commodities from the natural environment: agriculture, livestock, fisheries, and forestry.
- The secondary sector includes economic activities that transform raw materials extracted from nature into processed products: industry, construction, mining, and energy sources.
- The tertiary sector comprises a wide range of activities that, unlike the primary and secondary sectors, do not produce a material good but provide a service to society. These include trade, transport, health, and education.
Who is Involved in Economic Activity?
Families
Families can consist of one or more persons. The economic role they play is twofold. On the one hand, they are involved in production, providing companies and the state with their work and capital. On the other hand, they consume goods and services produced, and this consumption is driving economic activity.
Companies
Companies are engaged in the production of goods and services for financial gain. To develop their business, they need the work of families, in exchange for which they pay a salary, and they buy products and services from other companies (machines, for example). There are various kinds of companies:
- According to the property, they may be public if they belong to the state or private if they belong to private persons or entities.
- We can also classify companies by their size, which is set according to one of these criteria: the number of workers they employ or their billing. In the EU, a micro-enterprise is one that has fewer than 10 employees and a turnover of up to two million per year. A small business is one that employs fewer than 50 workers or bills between 2 and 10 million euros. A medium-sized company has up to 250 employees or bills up to 50 million per year. When these figures are exceeded, it is defined as a large company.
- There are individual companies, i.e. belonging to one person, and others who have multiple owners. In these cases, owners usually constitute societies. There are many types of companies. The most common are limited liability companies (SL) and public limited companies (SA).
The State
- Makes the rules governing economic activity in the country.
- Encourages private sector activity through grants and other aids.
- Creates businesses in strategic sectors (defense, aerospace, etc.) and areas in difficulty.
- Provides public services (education, health, post, etc.) and it takes many goods and services.
- Generates many jobs because it needs workers who provide public services (teachers, doctors, judges, cops, etc.).
To finance these actions, the state collects taxes.