ECONOMIC AGENTS: TYPES AND CHARACTERISTICS - DUDAS - 2024

Economic agents are any individual, institution or group of institutions that makes some type of decision within an economy. In other words, they would be the intervening actors in an economy, within a concrete economic system with its corresponding rules.

These agents were established by expert economists in order to synthesize the economic game and simplify all its processes. In this way, its analysis is easier, as well as the explanation of its entire operation. Within a closed economy, there are three major economic agents.

These are: families (consumers), companies (producers) and the State (market regulator). Although each one has a different role, they are all completely essential, and it is essential that they establish relationships with each other. Keep in mind that there are times when economic agents play a double role.

For example, families, in addition to consuming, can act as producers working for a company, and companies can act as consumers by buying materials. In the same way, the government is a producer and consumer on many occasions.

Thanks to economic agents, wealth is generated that theoretically benefits all actors. In addition, if all of them fulfill their different roles correctly, the economy works properly, improving society as a whole. This is so because all agents work by relating to one another.

If any one of these does not work as it should, it would affect the others in a huge way, thus affecting the economy in general.

Types and characteristics

The families

A family would be a group of people who live together. These are the economic units in charge of consumption.

We have always associated the concept of family with family groups of people related to each other. However, in economics the term acquires a broader meaning. The family here can have only one member, or be several members and not be related in any way.

For example, a single man without children who lives alone is considered a family. Families play a double role: on the one hand, they are the agent dedicated to consumption; and on the other, they are the owners of production resources, providing work.

In addition, self-consumption can also exist in families. This means that they produce by themselves what they later consume; that is, they provide work to consume it later. This occurs in greater quantity the less developed the region is.

characteristics

- Families are consumers and, at the same time, offer the factors of production, generally in the form of work.

- They are the owners of the productive factors.

- Their income is divided into consumption, savings and payment of taxes.

The companies

Companies are the agents in charge of producing goods and services through the factors of production that families offer them.

In exchange for these factors of production, they have to pay them certain rents (wages in exchange for work; interest, dividends, etc., in exchange for capital; or rents in exchange for land).

Once the goods and / or services are produced, they are offered to families, other companies or the State itself for later consumption.

characteristics

- They are those that produce goods and services using the family's factors of production.

- For these factors of production they have to pay the families some rents.

- They seek the greatest possible utility and benefit.

- Once produced, they offer the goods and services to families, other companies and the State for their consumption.

- They can be public, private or voluntary.

The state

The State is the set of public institutions of a country. In addition to being able to offer and demand goods and services, it has the ability to collect taxes from families and companies in order to use them to manage their activity.

Its intervention in the economy is the most varied: on the one hand, it offers and demands goods and services and factors of production; on the other, he acts as a tax collector in order to redistribute them for different activities.

These activities include providing the country with public goods and services (roads, universities, etc.), subsidizing families and companies with more needs (for example, through unemployment benefits), or managing all its institutions.

characteristics

- Formed by the public institutions of a country.

- Acts as supplier and purchaser of goods and services.

- It acts as a supplier and demander in the market for production factors.

- It has the ability to collect taxes from companies and families.

- With the funds it collects, it carries out public spending, subsidies and manages its own operation.

How are economic agents related?

As seen so far, these three agents are closely related to each other through the exchange of goods and services.

Within this process, economic activities are divided into two types: consumption activities and production activities.

Consumer activities

They are those made by families when they buy goods and services for final consumption. Therefore, these cannot be used for the production of other goods or services, or to be traded at a higher price. Some examples might be food, clothing, or furniture for the home.

Production activities

This activity is carried out by companies and the State. Thus, they buy intermediate goods and services from other public or private companies, in order to use them for the production of other goods or as final products that they will later sell.

For example, in an automobile factory these goods can be the parts (doors, motor, etc.) that are used for the finished product (intermediate goods), or the products that will be used to be sold as they are acquired, such as wheels that will serve as spare parts.

In addition, companies and the State can also acquire capital goods, products that are used to produce other goods and services, but are not used for final consumption nor are they part of the final product.

Some examples are vehicles dedicated to transport, or technological machines that are used in the production of some goods.

References

1. Hartley, James E. (1997). "Retrospectives: The Origins of the Representative Agent." Journal of Economic Perspectives.
2. Kirman, Alan P. (1992). "Whom or What Does the Representative Individual Represent?" Journal of Economic Perspectives.
3. Lucas, Robert, Jr. (1980). "Equilibrium in a pure currency economy". Economic Inquiry
4. Stiglitz, Joseph E. (1987). Principal and Agent. The New Palgrave: A Dictionary of Economics »
5. ABC Finanzas (2016) “Economic agents”. abcfinanzas.com