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 . That is, they are activities capable of generating wealth for communities, through the generation of goods or services to supply ( supply ) 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 consisting of three phases:
- Production , understood as a step, becomes raw material , through processes of a different nature, to obtain products or semi-processed products, or for resources or services to be offered.
- Distribution , a stage that consists of delivering the goods or services produced to the marketing circuits, which in turn deliver them to the respective consumers .
- Consumption , understood as the final phase in which the good or service is consumed, closing the productive circuit and returning the necessary capital to sustain the system over time .
These three phases are interconnected and mutually affect each other, so that understanding how each one occurs illuminates the final results of the production process : low production and high consumption can lead to higher product prices. And their shortage at the same time the opposite scenario leads to lower prices and a drop in price. These relationships are treated by economists.
Economic activities can be grouped into three major economic sectors, depending on their location in the production 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 great or little manipulation of the same. Normally, the resources thus obtained are destined to other industrial sectors that use them as raw material and add 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 collected by the previous sector and uses it for various transformation processes, that is, mechanical, physical , chemical or of another nature, 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, crafts, construction or obtaining electricity .
- Tertiary sector or service sector . In this category are non-productive economic activities, that is, those that do not involve obtaining and transforming raw materials, but are dedicated to the provision of services for the direct satisfaction of the needs of third parties, whether they are final consumers or industries in any of the sectors. productive. Unlike the two previous sectors, it focuses on stages after production (distribution and consumption) of economic activity. Examples of activities in this sector are: repair and maintenance services, security services, accommodation and hotel services, goods transport services, finance and banking, shows and entertainment, telecommunications and public services .
- Quaternary sector or innovation sector . Finally, we usually speak of the quaternary sector to refer to non-productive activities not related to the service sector, whose objective is to contribute to the increase of knowledge and the improvement of science and techniques , which has a great impact on other sectors of the economy. Examples of this sector are: scientific research , technological innovation, medical research, education, consulting, financial planning services, media and cultural sector.
On the other hand, it is called productive factors or production factors to the set of essential resources for the productive activity itself, that is, 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 , 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.
- The capital factor , represented by the letter K in economics, consists of physical or real capital (i.e., current or real estate), human capital ( labour ), and financial capital (cash and/or debt capacity).
Economic activity and state
We might think that economic activity is everything that generates profit. However, the historical truth of the term economy would be missing. Economics, from which economic science derives, was born under the idea of managing available and normally scarce resources to satisfy human needs. Therefore, profit is not a necessary condition for considering an activity as economic. Thus, one thing is an economic activity and another is profitable.
For example, a foundation that carries out processes that allow better water management in areas where it is scarce and whose objective is not monetary profit, but to help society, is also developing an economic activity. Whereas, to investigate, you must have resources that you can obtain in a variety of ways and manage them to meet a need.
Consequently, the State is also part of economic activity and not exclusively from the perspective of the tax collector. Thus, if it offers certain public services, in order for them to be possible and sustainable, it must manage them with the resources at its disposal.