Economic Agents: Consumers, Families, Companies, and Public Sector
Consumers and Families
Consumers decide which goods and services best meet their needs. Rationalization criteria influence these decisions:
- Preferences: Choices are made from two or more options with equal features and services that meet the same need.
- Level of Income: Income conditions the cost.
Consumers provide factors of production to companies in exchange for rent.
Income: The value or price paid for the use of a productive resource in a given period. Income has three sources:
From production factors:
- Work (salary)
- Natural Resources (Rental)
- Capital (Interest)
Family Composition
Families consist of:
- Employers: Organize and coordinate production. The entrepreneur, depending on the company size, can be:
- SMEs (small and medium enterprises): Ownership and management are held by the same person.
- Large Businesses: Owner and manager are different people.
- Self-employed: Entrepreneurs who make decisions for their business.
- Workers: Human element involved in the production process under the direction of the employer in return for a wage.
- Annuitants: People living off income from investments, such as flats or shares.
- Strict Consumers: People who do not participate in the production process.
Vocabulary
- Income Tax: A tax on the income of natural persons, paid based on the income they receive.
- Union: An association for the defense of workers’ interests.
Companies
Companies make decisions about the production and distribution of goods and services using factors of production provided by families. The objectives are:
- Maximize Profit: Companies try to increase revenue and reduce costs. Business profit = Revenue – Expense.
- Stabilize and Grow: Companies must ensure client stabilization and growth (natural tendency of companies) to expand internationally.
- Creating Jobs and Wealth: Companies should create jobs and wealth in their area of influence.
- Respect the Environment: Companies are responsible for many social problems such as pollution and are influenced by environmental concerns.
Public Sector
The public sector consists of the administration (central or state; autonomous, local), public companies (e.g., RENFE), and autonomous agencies (e.g., Social Security).
The public sector distributes its geographical spheres of influence:
- Local Government: Operates close to the city level. Has its own budget, and its revenue comes from the State. Examples: Municipalities or county councils.
- Regional Administration: The State is decentralized. The autonomous communities assume powers of the State, and the budget is the same, but their income still comes from the State.
- Central Administration (State): Composed of the State and its autonomous bodies. Has lost significance.
- European Administration: Due to Spain’s membership in the EU.
Vocabulary
- Taxes: Amounts paid by businesses and families to contribute to public expenditure.
- Expenses: Provision of public goods and services, subsidies, and transfers.
- Legal and Institutional Framework: The laws regulate and ensure the functioning of the economic system.