Essential Economic Principles and Concepts
Classification of Goods and Services
- Services (e.g., transportation)
- Consumer Goods (e.g., food)
- Production Goods (e.g., machines)
- Durable Goods (e.g., electrical appliances)
- Perishable Goods (e.g., food)
- Public Goods (e.g., libraries)
- Private Goods (e.g., personal cars)
- Intermediate Goods (e.g., paper)
- Final Goods (e.g., a book)
- Complementary Goods (e.g., washing detergent)
- Substitute Goods (e.g., pears and apples)
Determinants of Productivity
- Training, Experience, and Skills of Workers: Well-trained individuals can perform tasks more efficiently than others.
- Organization and Management: The way a company is organized and managed significantly impacts its productivity.
- Technological Change and Investment in Capital Goods: Enhanced machinery and tools increase output over time.
Primary Economic Sector
The primary sector, primarily agriculture, emphasizes modernization. Productivity has increased significantly, yet there’s a stark global contrast in agriculture, characterized by crop intensification. The proportion of the workforce employed in the primary sector is considerably higher in developing countries than in developed ones.
Secondary Economic Sector
The secondary sector includes industrial activities. Industry is currently undergoing a process of relocation, impacting the population engaged in this sector.
Tertiary Economic Sector
The tertiary sector is highly diverse, encompassing a wide range of activities such as transport, trade, tourism, and hospitality. In most of the tertiary sector, the importance of labor is considerable.
Functions and Objectives of Economic Agents
- Families: Their objective is to maximize their own welfare.
- Businesses: Their goal is to maximize profits.
- Public Sector: Its aim is to maximize general welfare.
The Circular Flow of the Economy
The circular flow is formed by the flow of goods and services and factors between families and businesses.
Market Economy System
Its advantages are:
- The efficiency of its operation.
- Economic freedom.
Its drawbacks are:
- The market is not always efficient.
- The economy can be unstable.
- The creation of artificial needs.
- Economic freedom can be questionable.
Types of Regional Economic Integration
- Free Trade Areas
- Customs Union
- Common Market
- Monetary Union
- Economic Union
Economic Growth, Development, and Human Development
- Economic Growth
- Economic Development
- Human Development
Market Failures and International Organizations
Market failures and the need for international organizations include:
- Large inequalities between countries and negative externalities.
- Lack of competition.
- Degradation of international public goods.
- Managing international economic crises.
Key Features of Developing Economies
- Low income per capita.
- Strong social and income inequalities.
- Low productivity.
- Low life expectancy.
- High unemployment and underemployment.
- Dependence on the primary sector.
- Serious imbalances in the production structure.
- Technological dependence on foreign sources.
- Imperfect markets and limited information.
Major Causes of Migration
- Economic factors.
- Political, religious, and ideological factors.
- Climatic factors.
- Situations resulting from war and natural disasters.
- Relocation prompted by family or friends.
Economic Consequences of Migration
- Increased global economic growth.
- Convergence of wages.
- Increased incomes in countries of origin.
- Short-term increase in income tax and social security payments in recipient countries.
- Growth in recipient countries.
- Loss for the country of origin, particularly of its workforce and the investment made in it.