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The Economic Problem-
The nature and purpose of
Economic Activity
- Central
purpose of
Economic
Activity
- production of GOODS
and SERVICES to satisfy
our needs and wants
- If we can organise a system
meeting needs and wants more
efficiently then we could
INCREASE ECONOMIC WELFARE
- If we can organise a system
meeting needs and wants more
efficiently then we could
INCREASE ECONOMIC WELFARE
- production of GOODS
and SERVICES to satisfy
our needs and wants
- Questions
and economic
system
attempts to
solve
- WHAT should we produce?
- HOW should we produce it?
- For WHO should
it be produced?
- WHAT should we produce?
- Some (less obvious) examples of economic activity...
- DIY
- subsistence farming
- producing and eating your own crops to live
- producing and eating your own crops to live
- barter
- occurred in olden days:
e.g. trading 2 chickens
for a sheep
- occurred in olden days:
e.g. trading 2 chickens
for a sheep
- consumption
of clean air
- consumption of the
natural environment for
leisure and recreation
- e.g. running around a field
- e.g. running around a field
- DIY
- What does production create?
- CONSUMER GOODS
- bought by PEOPLE for the purpose
of FINAL CONSUMPTION,
satisfying needs and wants
- e.g. clothes, food, jewelery
- CONSUMER DURABLE products are consumer goods
with a long average life during which they deliver a
'stream' of consumer services, e.g. a washing machine
- NON-DURABLE
consumer goods include
washing powder, it needs
replacing after it has been
used
- bought by PEOPLE for the purpose
of FINAL CONSUMPTION,
satisfying needs and wants
- CAPITAL GOODS
- bought by FIRMS for the purpose
of PRODUCTION
(unmanufactured goods)
- bought by FIRMS for the purpose
of PRODUCTION
(unmanufactured goods)
- SERVICES
- INTANGIBLE economic goods (can't be felt or seen)
- Can be COMMERCIAL SERVICES (aka INDIRECT)
- e.g. banking, insurance
- through firms
- e.g. banking, insurance
- Can be DIRECT SERVICES
- e.g. hairdressing, teaching
- straight to people
- e.g. hairdressing, teaching
- INTANGIBLE economic goods (can't be felt or seen)
- CONSUMER GOODS
- The Structure of Production
- 3 main sections-
- PRIMARY SECTOR
- SECONDARY SECTOR
- TERITARY SECTOR
- produces services e.g.
transport, financial services
and education
- produces services e.g.
transport, financial services
and education
- raw materials transformed or manufactured into goods
- TERITARY SECTOR
- raw materials extracted, food is grown
- SECONDARY SECTOR
- PRIMARY SECTOR
- 3 main sections-
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