What are Economic Activities?
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What Does Economic activities Mean
We explain what economic activities are and what their phases. Also, what are the economic sectors and productive factors.
What are economic activities?
An economic activity is any type of activity in which goods and services are produced or exchanged , with the aim of satisfying the needs of a population . In other words, these are activities capable of generating wealth for communities, through the generation of goods or services to provide ( supply ) to a local, regional or global market of people or entities that need them ( demand ) .
As its name suggests, economic activities are a fundamental part of the economy , and although they can be extremely diverse, varied and complex, they always encompass a cycle made up of three phases:
- Production , understood as the stage becomes the raw material , by processes of different nature, to obtain products or semi - processed, or for resources or services to offer.
- Distribution , a stage consisting of delivering the goods or services produced to the marketing circuits, which in turn will deliver them to their respective consumers .
- Consumption , understood as the final stage in which the good or service is consumed, closing the productive circuit and returning thenecessary capital to sustain the scheme over time .
These three phases are interconnected and affect each other reciprocally, so that an understanding of how each one occurs sheds light on the final results of the production process : low production and a high consumption rate can lead to higher product prices. and its scarcity, while the opposite scenario leads to lower prices and a fall in price. These relationships are dealt with by economists.
It can help you: Economic development
Economic activities can be grouped into three large economic sectors, depending on their location within the productive circuit. These sectors are:
- Primary or basic sector . It is the initial sector of the production chain, characterized by the collection or extraction of materials from the environment , through processes that may involve much or little manipulation of them. Usually, the resources obtained in this way are destined to other industrial sectors that use them as raw materials, and that add added value along the way. Examples of primary sector activities are: agriculture , fishing, livestock , mining, oil extraction, beekeeping or forestry.
- Secondary or intermediate sector . This sector receives the raw material gathered by the previous sector and uses it for various transformation processes, that is, mechanical, physical , chemical or of another nature, in order to obtain manufactured products, which can be direct consumer goods, equipment for other industries and sectors, or even semi-processed materials destined for other industries in the same secondary sector. Examples of activities in this sector are: manufacturing , iron and steel, handicrafts, construction or obtaining electrical energy .
- Tertiary sector or service sector . In this category are those non-productive economic activities, that is, that do not involve the obtaining and transformation of raw materials, but are dedicated to providing services to directly satisfy the needs of third parties, whether they are final consumers or industries of any of the productive sectors. Unlike the two previous sectors, it focuses on the stages after production (distribution and consumption) of economic activity. Examples of activities in this sector are: repair and maintenance services, security services, lodging and hotel services, freight transport services, financeand banking, shows and entertainment, telecommunications and public services .
- Quaternary sector or innovation sector . Finally, we often speak quaternary sector to refer to non - productive activities and not related to the service sector, whose objective is to contribute to increasing the knowledge and the improvement of science and techniques , which has a huge impact in the other economic sectors. Examples of this sector are: scientific research , technological innovation, medical research, education, consulting, financial planning services, the media and the cultural sector.
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On the other hand, it is called productive factors or factors of production to the set of resources that are essential for the productive activity itself, that is to say, all that element that involves the production itself. These factors are classified as:
- Earth factor , which represents the material goods provided by nature , whether from the earth's crust , the subsoil, flora and fauna or even the atmosphere .
- Human factor or work , which consists of the human intervention necessary to start any economic activity. In economics it is symbolized by the letter T.
- Capital factor , represented by the letter K in economics, consists of physical or real capital (that is, circulating or real estate), human capital ( labor ) and financial capital (money and / or the capacity to indebtedness).
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