Introduction to Economics

Posted on Nov 1, 2024 in Geography

Economic Activities

Economic activities are processes used to obtain goods and services to satisfy human needs and wants (food, health, education, etc.). These activities are comprised of three phases:

  1. Production: Goods are created.
  2. Distribution: Goods are taken from producers to consumers.
  3. Consumption: Goods are bought and used.

Economic Sectors

There are three main economic sectors:

  1. Primary Sector: Obtains goods and raw materials from the environment. Its main activities include agriculture, farming, cattle raising, livestock breeding, fishing, etc.
  2. Secondary Sector: Transforms raw materials into elaborated products. This sector is also known as industry and includes activities such as textile production, iron and steel production, cement production, electronics manufacturing, etc.
  3. Tertiary Sector: Provides services such as trade, transport, healthcare, education, hospitality, etc.

Economic Agents

Economic agents are the key players in an economy. They include:

  1. People: They work and produce goods, provide services, buy, and consume products.
  2. Companies: Produce and sell goods, provide services, seek profit, employ workers, pay wages, and buy products from other companies.
    Types of Companies:
    • Ownership: State-owned companies or private companies.
    • Size: Small, family-owned companies, medium and large companies, and multinational companies.
  3. State: Establishes rules about economic activities, provides public services, and helps private companies with subsidies and credits.

Factors of Economic Activity

Several factors contribute to economic activity:

  1. Labor: Work done by people, which can be physical or intellectual. It is the main source of income for most families.
  2. Natural Resources: Goods provided by nature, such as water, sunlight, and wind. These resources can be:
    • Renewable: Can be replaced and are unlimited.
    • Non-renewable: Cannot be replaced and are limited.
  3. Capital: Resources used to produce wealth, including money used for starting a business.
    Types of Capital:
    • Physical Capital: Tangible assets.
    • Human Capital: Workers’ knowledge, skills, and training. Well-trained workers increase productivity and develop new ideas.
    • Financial Capital: Money.
  4. Technology: Methods used to make goods and products. Technological advances have significant consequences, including:
    • Increased production.
    • Savings on labor costs, but potentially leading to increased unemployment.
    • More profitable ways of production.

Types of Economic Systems

  1. Subsistence System: Found in undeveloped countries, where each family produces food and clothing to cover its basic needs and exchanges surpluses at local markets.
  2. Communist System: Characterized by state ownership of the means of production, with no private ownership. The state decides what to produce, how much to produce, and the prices of goods and services.
  3. Capitalist System: Also known as the free market system, it is characterized by private ownership of the means of production. The aim of economic activity is profit, and supply and demand regulate the economy. Free competition allows any person or company to compete in business.

Population and Work

  1. Economically Active Population: People over 16 years old who can supply labor. They can be:
    • Employed: Have a job.
    • Unemployed: Have lost their job and are jobless.
  2. Labor Relations:
    • Employers: Proprietors of businesses and companies who employ workers and pay wages.
    • Employees: Workers paid by employers.
    • Self-Employed Workers: Have small businesses and work for themselves.
    Employers and employees have different interests and negotiate employment agreements that cover working conditions such as wages, holidays, and work schedules. Workers are represented by labor unions.
  3. The Unemployment Problem: Job loss is a significant problem for workers and the country. The main negative effects include:
    • Decreased family income and a lower standard of living, leading to reduced consumption and sales for companies.
    • Decreased tax collection and increased government spending.
    • Increased underground economy, which is illegal and does not pay taxes.

Traditional Powers

  1. United States of America (USA): Features of the US economy include:
    • Large amounts of natural resources and energy, although the US consumes a lot of energy and imports petroleum.
    • US companies invest heavily in research and are leaders in scientific and technological advances.
    • Quality universities and labor schools produce a highly skilled labor force.
    • The US dollar is the world’s most important currency.
    Weak points in the US economy:
    • High levels of consumer debt.
    • A negative trade balance due to higher imports than exports.
  2. Japan: Strong points of the Japanese economy include:
    • High industrial technology.
    • Exports of manufactured products.
    • Large global investments, with the Japanese yen used in international transactions.
    Weak points:
    • An aging population.
    • Scarce natural and energy resources, requiring Japan to import nearly all its energy.
  3. European Union (EU): The EU has the highest GDP and trade volume globally and provides a high standard of living for its inhabitants through welfare states. However, EU countries are in different economic situations, with significant regional disparities. The EU is currently facing an economic crisis.
  4. Canada: Has a small population, abundant natural resources, and a well-trained workforce.

Emerging Powers: BRIC

  1. Brazil, China, India: These countries have experienced rapid economic development in recent years and share some common features:
    • Cheap labor force with poor working conditions and low wages.
    • Foreign capital investment from multinational companies seeking higher profits.
    • Vast natural and energy resources.
    • Widespread poverty and significant income inequality.
    • Large populations and strong domestic demand for goods.
  2. Russia: Russia is transitioning from a communist system to a capitalist system. Its strengths include a well-educated workforce and vast natural resources, particularly oil and natural gas. Weaknesses include outdated technology, excessive bureaucracy, and corruption.

Regional Powers

  1. Australia: Has considerable influence in East Asia and the Pacific, with competitive farming products worldwide.
  2. The “Asian Tigers”: Singapore, South Korea, Taiwan, and Hong Kong. These countries have a cheap, skilled labor force and produce low-cost goods.
  3. Oil-Producing Countries: Countries in the Persian Gulf control a strategic resource – oil. Oil revenues allow them to invest in foreign countries.
  4. The Republic of South Africa: Rich in natural resources and has a trained workforce.
  5. Some Countries in America: Mexico, Argentina, and Chile are experiencing rapid economic development.