2. INTRODUCTION
Almudena Corrales Marbán
The economic systems in the world today
include subsistence models, capitalism, planned economies and
mixed models. All these systems help people’s needs and
desires in different ways.
Our planet resources are limited, and economic
exploitation can can lead to the overuse of resources and the
creation of excessive amount of waste.
Future generations should work on this problem or we
will not have enough natural resources . We must all work
together to consume the Earth’s resources responsibly.
3. 1. HOW ECONOMIC ACTIVITY
WORKS?
Almudena Corrales Marbán
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.
4. 2. THE THREE PHASES OF THE
ECONOMIC ACTIVITY
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2.1. PRODUCTION
The company decides on the products to be produced, the
amount and the manufacturing process.
These products can be goods or services.
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
SERVICES
• Healthcare, public transport,
police,etc
• They require infrastructure and
the investment of the
government.
5. Almudena Corrales Marbán
2.2. DISTRIBUTION
Distribution occurs after the production and consists of the
delivery of goods or services to the consumer. This involves:
Storage, transport, marketing, sale of goods.
There are two steps in the sales process:
WHOLESALE
Wholesalers buy a large
number of products and
sell them to companies,
who then sell the goods to
individual consumers
RETAIL
Retail businesses buy a
small number of gooods
from wholesalers and sell
them directly to the
public in shops
6. An example of distribution
AMAZON
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8. Almudena Corrales Marbán
2.3. 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 goods, such as food or drinks, and use
others, such as television or computers.
9. 3. THE FACTORS THAT AFFECT
PRODUCTION
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THE KEY INGREDIENTS FOR THE PRODUCTION OF
GOODS ARE:
• NATURAL RESOURCES
• LABOUR
• CAPITAL
• TECHNOLOGY AND EXPERTISE
10. 3.1. Natural resources
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Nature gives us many
elements that we
transform to satisfy the
needs of human society.
Because these resources
are limited and could run
out soon, we need to
make sure we do not
overexploit them.
11. 3.2. Labour
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Labour is all human
activity, whether physical
or intelllectual, that is
required to produce goods
or provide services that
are necessary for people
and society.
12. 3.3. Capital
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Capital includes all of the resources used
to produce goods and services. There are
two type of capitals:
Physical capital. This includes the land
on which the business is built, the
construction and maintenance of the
premises, and the machinery and raw
materials needed for the production of
goods and services. All this requires a
considerable investment.
Financial capital. Money needed to
begin production. This includes loans of
banks or other institutions.
13. 3.4. Technology and expertise
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Technical expertise makes possible
the design, construction and use of
machines and devices for the
production of goods and services.
We can distinguish three types of
production according to this
technology:
• Manual production
• Mechanical production
• Hi-tech production
Competitive companies require
quality training programmes for the
employees and also laboratories to
reach new technology and new
products
14. 4. THE ECONOMIC SECTORS
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Economic sectors are so diverse that they have been
traditionally divided into three large economic sectors.
However, a fourth sector has been recently added to
this classification.
1. THE PRIMARY SECTOR
2. THE SECONDARY SECTOR
3. THE TERTIARY SECTOR
4. THE QUATERNARY SECTOR
17. 4.1. The primary sector
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This sector includes
activities that produce food
for consumption and raw
materials for industry. It
consists of agriculture,
livestock farming, fishing
and forestry.
18. 4.2. The secondary sector
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This sector includes all economic
activities that transform raw
materials found in nature through
industrial processes into
manufactured products. The main
activities are:
• Industry
• Construction
• Exploitation of energy sources
(water, oil, gas)
19. 4.3. The tertiary sector
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This sector includes a wide variety
of activities. It does not produce
material goods like the primary and
secondary sectors. It provides
services to the population or to
companies such as healthcare,
education, transport, tourism, trade
and culture.
This sector is the fastest-
growing sector due to the
appearence and expansion of an
information society, which has
aided the development of scientific
and technical research, including
on-line services and shops.
20. 4.4. The quaternary sector
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This is a new economic sector
based on expertise that includes
activities related to the
creation, distribution and
manipulation of information,
ans also social, cutural and
economic innovation and
research. Workers in these
fields need special training
and high levels of expertise.
The use of advance technology
21. 5. ECONOMIC SYSTEMS
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All societies need to think about what products they can
make, how they make them, and who they will make them
for.
These systems can be organised in different ways according
to the society’s beliefs and historical background.
• The subsistence system
• The capitalist system
• The planned economy system
• Alternative economies
22. 5.1. The subsistence system
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This system is chracteristic of
societies with low levels of
development, people produce what
they need to meet their basic needs.
They work the land for food, build
their own houses, make their own
clothes, etc. Any surplus goods are
sold in local markets.
23. 5.2. The capitalist system
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This system defends free
competition between individuals
and companies to develop
economic activities. It is also
called the free market system.
It is based on the LAW OF
SUPPLY AND DEMAND for fair
prices for goood and services that
people need. The means of
production are private.
Capitalism started with the
Industrial Revolution in the late
18th century.
A little bit of critical thinking
24. 5.3. The planned economy system
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In this systen, the state owns the
means of production and controls
all aspects of the economy. It
decides how much is produced. It
also decides how much goods will
cost and what to do with the
profits.
Today this system exists in
countries like China or North
Korea. China, however, is changing it
slowly by openning its economy to
foreign countries and investment.
25. 5.4. Alternative economies
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These economies reject
capitalism because they say it
does not meet the real needs of
its citizens and promotes
inequality.
They suggest unique model for
society that is based on solidarity
between people, respect for
nature and the common good.
