Understanding the Economy: Resources, Systems, and Trends
The economy is concerned with the administration or use of existing resources to satisfy the needs of individuals and groups.
Economic Goods
Economic goods are produced to satisfy people’s needs.
Products are materials obtained directly from nature, such as wheat and fish, or manufactured goods like automobiles and clothing.
Tasks that provide services include transporting a person or group, healthcare, and business services.
Resources are limited and may run out. They are bought and sold.
Economic Activities and Resources
Economists study the economic activities that produce goods and services through different types of resources or production factors.
- Natural resources are provided directly by nature, such as land, water, and plant species.
- Human resources are people who contribute their work, knowledge, and experience.
- Capital is often identified with money but really consists of buildings, machinery, and equipment of any kind.
Types of Economic Systems
- Planned Economy: The state owns most of the factors of production and decides how it should operate.
- Interventionist Economy: Government policies and laws affect production.
Supply and Demand
The market economy is a system in which individuals and companies produce, buy, and sell goods and services freely without state intervention.
- If the supply of a commodity is too high for consumers, its price goes down, leading to rebates to encourage buying.
- If the supply of a good is scarce, consumers are willing to pay more for it, leading to increased supply.
Economic Operators
For a functioning economy, human groups and institutions, known as operators, are imperative.
- Family: Considered an economic agent, a family can be constituted by one person or a community of people, e.g., students sharing housing.
- Company: An entity organized to produce economic goods. It may consist of one or more persons.
Companies
Companies are responsible for obtaining goods and services offered to the market. The employer directs the organization and may or may not be the owner. Companies owned by several individuals are called corporations, owned by shareholders who hold a part of the organization’s shares.
The Changing World of Work
- There has been an increase in the number of younger workers, women, and people under 30 years old in the workforce.
- Information and Communication Technologies (ICTs), such as the Internet, telephony, and television, have revolutionized the production of enterprises.
- Telework allows employees to perform tasks from home.
- Workers are increasingly valued for their education and require training and qualifications to meet company demands.
- Workers have more free time and flexible schedules that suit their needs.
- There have been improvements in wages, safety, hygiene, and prevention of occupational risks and diseases, driven by agreements between social agents and organizations like the European Atomic Energy Community.
- There are more men employed than women. Women encounter more obstacles to finding jobs, receive lower wages, have shorter contract durations, and often perform other tasks like childcare and housework.
CPI and Inflation
The Consumer Price Index (CPI) indicates the price trends of products and services purchased by consumers. It is obtained from surveys about what families spend on certain products. The increase in consumer prices over a period is called inflation.
Economic Globalization
Media and ICTs allow people around the world to connect, buy and sell, access capital, and seek employment. A single organization may distribute its operations among different countries to reduce costs and obtain benefits, such as manufacturing cocoa in Asia and Africa and trading in America. Free trade agreements remove tariffs, and states adopt their own economic measures with respect to other treaty countries, like the North American Free Trade Agreement (NAFTA). Common markets also remove tariffs and allow the free circulation of people and capital among associated countries, such as the European Union and South American common markets. International bodies like the UN also promote globalization.