1. How economic activity works

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People have individual needs, such as food, clothes, hygiene and exercise, whereas society has collective needs, such as healthcare, justice, communication and education.

What is economic activity?

Economic activity describes all the jobs done by workers in order to satisfy the needs of people and societies by providing goods or services.

Production, distribution and consumption

Economic activity consists of three phases.

Consumer goods.

Intermediate goods.

Production

In this phase, the company decides on the product to be produced, the amount and the manufacturing process. The production of goods combines the use of natural resources, skills and labour. There are two types of goods.

Consumer goods, which satisfy the desires or needs of the consumer, such as clothes and furniture.
Intermediate goods, such as machines and tools, are used to manufacture consumer goods.

The provision of services, such as healthcare and public transport, requires the creation and organisation of hospitals and transport networks.

Consumer goods.

Intermediate goods.

Distribution

Distribution occurs after production and consists of the delivery of the goods or services to the consumer. This involves the storage, transport, marketing and sale of goods. There are two steps in the sales process.

Wholesale. Wholesalers buy a large number of products and sell them to companies, which then sell the goods to individual consumers.
Retail. Retail businesses buy a small number of goods from wholesalers and sell them directly to the public in shops.

Consumption

The buying of goods and services allows people to satisfy their needs. This means they are able to consume products or use goods and services.

People consume products, such as food and drink, and use others, such as televisions and computers, after they have bought them.

What type of consumers are we?

Our primary needs are those that are essential for life, whereas our secondary needs serve to increase our wellbeing.

People's needs and desires can be endless, but the resources to satisfy them (raw materials, jobs, services, etc.) are not. This is why we must choose what to produce, what service to offer and the most efficient way to proceed.

Consumption also makes reference to overconsumption, which is the desire to buy products or services that are not necessary. When this practice becomes widespread, it leads to a consumer society that puts the environment and the needs of future generations at risk.

Knowing our priorities and making a list before we go shopping is the first step to becoming a responsible consumer.

In contemporary society, too much consumption can lead to excessive consumerism.

Types of human needs.

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