Economic activity

Economic activity satisfies human needs through goods and services.

The three stages of economic activity are production, distribution and consumption, which is considered the engine of the economy

The factors of production are natural resources, labour, capital, technology and knowledge.

Economic activities are grouped into three main sectors:

  • Primary sector: This sector involves fishing, forestry, livestock farming and agriculture

  • Secondary sector: This sector involves mining, industry, construction and energy.

Tertiary sector: This sector involves all of the services, including retail, healthcare, and education. Advanced economies are mainly based on this sector

The three main agents of economic activity are the state, the companies and the individuals.

The factors of production and the labour market

The economically active population includes people of working age who are either occupied or unemployed.

Workers can be employed (salaries), self-employed or freelance

When the supply of people available to work is greater than the demand for workers, unemployment rises

Employee-employer relationships are regulated by the national laws, the collective agreements and the employment contracts.

Globally 2 billion people are in informal work

Economic activity and the global economy

An economic system is the way in which goods and services are produced and the way in which profits are distributed.

There are 3 economic systems:

1. The subsistence system is mainly based on the primary sector

  1. The communist system is where the state controls all aspects of the economy

  2. The capitalist system is the most common system today. The means of production are owned privately, there is motivation to make profit, production is regulated through the laws of supply and demand and there is free competition.

    The impediments to free trade are tariffs, subsides, limitations on imported items and quality standard

    Traditional and new economic powers

    Before the 21st century, the global economic powers were the USA, Japan and the EU. This is because of their high-quality education, high level technology, efficient transport and telecommunication infrastructure and the wealth of their inhabitants.

    The new world powers are China and India