Economic activity

Economic activity

1. Economic systems

   • Societies create
     • Rules
     • Institutions
     • Procedures
     • For producing
       • Goods
       • Services
   • Basic economic issues
     • What to produce
     • How to produce it
     • For whom
   • Deal with
   • Tradition-based economic systems
     • Past
       • Developed economic systems based on
         • Beliefs
         • Customs
         • Laws
       • Regulated and established rules of production
       • Determined the conditions under which the trade should be carried out
       • Livestock farming was very important
       • Most of the pastureland was owned by the municipalities or town concils
         • The municipality´s residents responsible for managing the land
       • Guarantee that the natural resources used in production were not exhausted
       • Production based on rules
         • Supported by very old customs
         • To benefit the community
         • Depended
           • On the resources in each region
           • On the importance of the market
     • Present
       • Technological innovations
       • Preserving the community
       • People in, whose economic activities are still governed by tradition
         • Artic Circle
         • Amazon
         • Africa
         • Southeast Asia
         • Oceania
       • Only allow for limited economic growth
       • Production restricted to
         • Self-consumption
         • Subsistence
       • Households
         • Purchase very few goods and consume what they produce
         • They generate very little surplus
   • Capitalism and the free market system
     • Capitalism, socioeconomic system
       • Private ownership in production, includes
         • Physical capital
         • Financial capital
       • Investment of capital to maximise potencial profits
       • What to produce determined by economic agents through the free market, that regulates
         • Production
         • Sale
       • Price: value, connects supply and demand
       • Supply: products available on the market for a price
       • Demand: what consumers are prepared to buy under conditions
       • Confliciting scenarios, prices
         • Decrease: Supply higher than demand(surplus)
         • Increase: Demand higher than supply(shortage)
     • Economic agents
       • Producing for supply at the lowest cost
       • Paying the lowest price
       • Unequal distribution of wealth
       • Supply want the greatest profit , more influenced by the side of the demand with greater resources
   • Authority: the central planning system
     • Decisions by an authority(State)
       • Aim: social equality
       • State
         • Makes forecasts
         • Determines
           • What produce
           • How will be produced
             • By defining a set of economic goals
           • Who it will be produced for
             • Based on existing needs
     • Greatest extent
       • Communist countries
       • Real socialism
     • Main powers
       • Soviet Union
       • China
     • Not always efficient
       • The forecasts may be wrong and a powerful bureaucracy is required
     • North Korea follows
       • Reforms
         • Based on a redefinition of the market
         • Different way of
           • Allocating
           • Producing
         • China
         • Vietnam
         • Laos
         • Cuba
         • Belarus
   • The mixed economy system
     • Most countries have
     • Aim: avoid
       • Negative effects of the unequal distribution of wealth in a free market
       • Lack of efficiency that characterises authority-based systems
     • Free market
       • Deals with basic economic problems
     • State
       • Authority
         • Help guarantee equal opportunities
     • Collects taxes
       • Money used to finance welfare state
         • Investing in
           • Public goods
           • Services
           • Social security benefits
     • In Nordic countries
       • State heavily involved
       • Developed economies
         • Due to their high average wealth rates

2. Human needs and production

   • Need
     • Primary
     • Secondary
   • Economic activities
     • Meet human material needs through production of
       • Goods
       • Services
     • Production
       • Creation
         • Goods
         • Services
     • Distribution
       • Transporting goods from the producer to the consumer
     • Consumption
       • Using
   • Factors of production
     • Resources that help to produce
       • Goods
       • Services
     • Natural resources
       • Raw materials
         • Used
           • Consumpion
           • Energy sources
       • Regenerated
         • Renewable
           • Consumed without being exhausted
             • Virtually inexhaustible
             • Need a period of time
         • Non-renewable
           • Exhausted by overconsumption
     • Capital
       • Human
         • Workers
       • Physical
         • Raw materials...
       • Financial
         • Money
     • labour
       • Physical
       • Intellectual
       • Use
         • Technology
         • Tools
         • Machines
         • Produce
           • Goods
           • Services
           • In exchange of a salary
   • Economic agents
     • Households
       • Meet their needs using
         • Goods
         • Services
         • Offered by
           • Businesses
           • Government
       • Supply labour
       • Supply financing through
         • Spending
         • Taxes
       • Receive
         • Wages
         • Salaries
     • Businesses
       • Produce
         • Goods
         • Services
       • Employ labour
       • Provide payment for work
       • Supply financing through taxes
       • Are financed by the spending of the other two agents
     • Government
       • Produce and uses
         • Goods
         • Services
       • Employs labour
       • Supplies financing through
         • Salaries
         • Pensions
         • Aid
         • Subsidies
       • Collects taxes