Economic Activity: Sectors, Key Concepts, and Systems
Economic Activity
Economic activity refers to any process that, through the use of resources, creates products and services to cover needs. It includes three phases: production, distribution, and consumption.
Economic Sectors
- Primary Sector: Activities dedicated to obtaining food and raw materials from the natural environment. Examples include agriculture, livestock, fisheries, and forestry.
- Secondary Sector: Economic activities that transform raw materials into elaborated products. Examples include industry, construction, and mining.
- Tertiary Sector: Activities that do not produce tangible goods but provide a service to society. Examples include commerce, transport, health, and education.
Key Economic Concepts
- Benefit: The result of the difference between expenditures and income derived from an economic activity.
- Good: Any object that satisfies a necessity and has a value.
- Service: A benefit designed to meet a personal or social necessity.
- Cost of Living: The minimum amount of spending needed to obtain basic goods and services.
- Investment: The amount of money intended to initiate a business or maintain and improve it to obtain a benefit.
- Market: The set of consumers who demand goods and services and all the producers that offer them.
- Production: Goods and services generated by economic activity.
- Productivity: The relationship between what is produced and the means used.
- GDP (Gross Domestic Product): The total value of goods and services produced in a territory for one year.
- GDP per capita: GDP of the territory divided by the number of inhabitants.
Economic Agents
- Families: Involved in providing production companies and the state with labor and capital. They consume goods and services, promoting economic activity.
- Companies: Involved in the production of goods and services for profit. They need the work of families, to whom they pay wages, and buy products and services from other companies. They can be public or private, and their size can be micro, small, medium, or large. There are also individual companies.
- The State: Performs the rules of economic activity in the country. It encourages private sector companies in strategic sectors with subsidies. It creates public services and many jobs.
- Employer: An association created to defend the interests of employers.
- Unions: An association created to defend the interests of workers.
Types of Capital
- Physical Capital: Formed by material elements such as buildings, machinery, or tools.
- Human Capital: Formation of skilled workers with experience.
- Financial Capital: The money needed to found a company and maintain its activity.
Production Methods
- Manual Production: Humankind provides force and management tools.
- Mechanized Production: The machine provides force, but the employee manages the tools.
- Technified Production: The machines provide force and handle the tools.
Economic Systems
- Livelihood Systems: Families produced everything they needed to cover basic needs.
- Communist System: Does not recognize private ownership of the means of production. The state handles all aspects of the economy.
- Capitalist System: Dominant in today’s world. Characteristics include:
- Private ownership of the means of production.
- The quest for profit as the engine of the economy.
- The law of supply and demand.
- The existence of free competition.