- Stages of the economic process
- 1-Production
- The earth
- Capital
- The job
- Business
- 2-Circulation and distribution
- 3-Consumption
- Private
- Public
- 4-Investment
- Example of the economic process of coffee
- 1-Production
- 2-Circulation and distribution
- 3-Consumption
- 4-Investment
- Other factors in the economic process
- Market
- Price
- Value
- Productivity
- Saving
- Technology
- Supplies
- Economic systems
- References
The economic process is the set of actions that are carried out to generate and exchange the means that are needed to satisfy the needs of society. Those means may or may not be tangible.
In this sense, all people become economic agents, assuming different roles in the market; producer, distributor, seller, buyer, etc.
These roles fulfill different but not exclusive functions within the economic process. For example, a producer can buy goods for his consumption or to use them as raw material for his production.
In each of the stages or phases of the economic process, elements that configure it emerge: money, capital, market, consumption, prices, supply, demand, etc.
The economic process is a daily and constant fact that occurs on a small and large scale in all societies of the world regardless of their level of development.
Stages of the economic process
Due to its nature of process, the economic one goes through several phases that occur in a cyclical and repetitive manner, namely:
1-Production
Production is the phase in which goods and services are generated, conceived, elaborated. It is about applying force (human or machine) to transform natural resources into something that will benefit a certain number of people.
It is the basis of the economy, since if there is no good or service to be exchanged, the other phases do not occur.
It is a phase that depends on factors such as:
The earth
Land (space) is necessary to extract the natural resources necessary for production.
Who owns it can receive a remuneration for its use called rent. The rent can be transferred, by selling the space.
Capital
It is the name given to the resources (monetary or not), available to boost production.
The profit that the owner receives from this capital from its use is called interest.
The job
Work is the effort made to make or use tools in order to produce a good or service.
The conception of work has generated debate among theorists of economics. The compensation received for doing work is called salary.
Business
It is the organization of the other three factors of production under certain parameters (physical or virtual), to generate goods and services on a larger scale than the individual.
In this sense, the entrepreneur pays to use the land and work; and charges for investing its capital and for the sale of the good or service produced. That which the employer receives as compensation is called income.
It should be noted that classical economic theory excludes the company from the factors of production.
2-Circulation and distribution
Source:
In circulation, goods and services reach consumers. At this stage, goods and services move to and within markets. Figuratively, circulation is a "bridge" between production and consumption.
In distribution, consumers obtain the goods and services and, in return, pay a price that is set by supply and demand in the market.
Commercial distribution involves the phases of transportation, marketing and placement at the points of sale.
These intrinsic phases of distribution are also considered when setting the prices of the good or service and constitute what is known as the distribution chain.
Intermediaries appear at each link in this chain: agents, wholesalers, retailers / sellers and consumers.
3-Consumption
It is the phase in which the goods and services produced are used, consumed and / or enjoyed by the consumer. At this point, society satisfies its needs and, therefore, it is considered as the last phase of the production process.
However, it is a circular activity because it is produced in order to access consumer goods, and that consumption generates production. Consumption is also the name for the portion of income that is not saved.
The gross domestic product (GDP) of a nation is largely made up of consumption, considered from the variable: spending.
Consumption can be:
Private
In a national economy, private consumption is that carried out by families and private non-profit institutions.
Public
It is represented by purchases and expenses incurred by public administrations in the exercise of their functions.
4-Investment
Investment metaphor in agriculture. Source: pixabay.com
It is the process of taking advantage of income in the generation of capital to return to production or for one's own enjoyment. In other words, it is about the financing of production.
Example of the economic process of coffee
1-Production
For coffee production we must start with the planting of the seed and the management of the crop. When the grains are prepared, we go to harvest, which can be done through two processes: picking and stripping.
Then the coffee processing begins. First, the pulp is removed, then it is dried and finally curing is carried out, a phase in which the quality of the coffee is determined through tastings.
This is followed by roasting, in charge of giving the coffee and ground coffee aroma and flavor, so that it can be finally packaged and prepared for distribution.
2-Circulation and distribution
The distribution companies follow protocols to keep the coffee in perfect condition until it reaches the companies that put it on the shop window so that it can reach the final consumer: supermarkets, bars, coffee shops, gourmet shops, etc.
3-Consumption
It is when the coffee is purchased or served to the final consumer. It can be when you buy a ground packet in your neighborhood supermarket or when it is served in the most chic coffee shop in town.
4-Investment
In this case, the investment would be for the producer to allocate part of his earnings to improve the conditions of his business, either by expanding it, buying machinery, hiring new personnel or investigating new markets.
Photo by Andrew Neel on Unsplash
Other factors in the economic process
Market
It is the physical or virtual space in which the exchange of goods and services takes place. In this area, the goods exchanged are called merchandise.
Price
It is the amount of money or goods that one is willing to pay for a good or service.
Value
It is a concept that refers to the cost of making the merchandise plus the profit received.
Productivity
It is the amount of product that results from the work during a certain time.
Saving
It is the part of the profits that is not spent.
Technology
Technology is the way production is done; all the techniques, tools and procedures that are involved in the process.
Supplies
They are all the elements that are required to make a product.
Economic systems
They are the way in which societies organize themselves to decide what to produce, how to produce it, and how to distribute that production.
These decisions end up responding to the social, cultural and political values of these groups.
The most studied and well-known economic systems are:
- Capitalist
- Socialist
- Social market economy
References
- Briones, Dulce Maria (2016). Daily life and the economic process. Recovered from: la-prensa.com.mx
- De Oliveira, Catherine (s / f). Economic systems. Recovered from: elmundo.com.ve
- López, Edgardo (2009). Eddies and bypasses. Elements of critical materialism. Recovered from: eumed.net
- Monetary (2013). The economic process and the circular flow. Recovered from monetarios.wordpress.com
- Rodrigo, Oscar S / F. What is the economic process and its phases. Recovered from brainly.lat
- Social made S / F. Production distribution and consumption. Recovered from: socialhizo.com
- Suarez and Others (2014). Summary of The Economic Process, Hachard. Recovered from altillo.com
- Vicharra Florian, Emerson Alex S / F. The economic process. Recovered from: laciencia-economica.blogspot.com