Economic Operators, Resource Allocation, and Economic Theory
Economic Operators
Economic operators are the decision-makers within an economic system, engaging in core activities to produce, consume, and accumulate. These include:
- Families: Make decisions about consumption and savings, determining what goods and services to buy to meet their needs.
- Companies: Economic units that produce goods and services, combining and organizing factors of production to create end products.
- Government: Governs the operation of the system, influencing the economy through taxation, public works, healthcare, security, and education.
- External Sector: Businesses, consumers, or governments of other countries that make decisions on spending, buying, and selling goods and services (imports and exports), and taking or giving loans.
Productive Factors
These are the basic elements used in the production of goods and services:
- Raw materials and natural resources: Represent nature’s contribution to productive processes, including land, energy, minerals, water, forests, and marine resources.
- Work: The time and intellectual and physical capabilities persons engaged in productive activities
- Capital: Durable goods used to produce other goods, such as industrial machinery, vehicles, computers, and installations.
- Entrepreneurship: Executives or managers at the forefront of business operations.
Economic Allocation of Resources
Because resources are scarce, a mechanism must be chosen to allocate them optimally to satisfy as many needs as possible. The fundamental economic problem is scarcity, arising from virtually limitless human needs and limited financial resources and goods.
Maslow’s Hierarchy of Needs
Maslow’s hierarchy of needs is a psychological theory proposed by Abraham Maslow, suggesting that as basic needs are met, humans develop higher needs and desires.
Positive vs. Normative Economics
In economics:
- Positive economics deals with facts and objective reality.
- Normative economics involves value judgments about those facts.
Economic Analysis
Positive economics uses mathematics, statistics, and econometrics to describe economic phenomena (descriptive economics) and explains these phenomena through economic theory, divided into:
- Macroeconomics: The study of economic aggregates such as national output and price level.
- Microeconomics: The study of the behavior of consumers and producers operating in individual markets.