Economics is the social science that studies the production, distribution, and consumption of goods and services. Economics aims to explain how economies work and how economic agents interact. Economic analysis is applied throughout society, in business, finance and government, but also in crime, education, the family, health, law, politics, religion, social institutions, sex, war, and science.
Economy – the system of production and distribution and consumption. The efficient use of resources; “economy of effort”. Types of economy. Planned economy, Free market economy Mixed economy. In the first type the government or state makes decisions about what will be produced, how it will be produced and in what quantities, at what price it will be sold and who will benefit from the sale of the products and services. Several countries in Eastern Europe followed this model in the past. The second type is also known as the “capitalist system”. The main decisions about production and prices are established by the economics of supply and demand.
Consumers choose who to buy from and how much they are willing to pay for a product or a service. Japan and USA are example of this type. Mixed type is the economy that combines elements of both free market and planned economy. Private companies are free to compete for most goods and services, but the government provides other services, such as public transport, education and health care. Italy, France, U.K. and Germany are example of mixed economy.
The first Law of Economics: the only thing more dangerous than an economist is an amateur economist. The second Law of Economics: the only thing more dangerous than an amateur economist is a professional economist!
The four factors of production: Natural resources, Labour, Capital and Entrepreneurship. In developing countries mining and farming provide most of the jobs for the working population. As countries like India and China become richer, industries grow up and people move from the countryside into the cities to find work in the secondary sector. Richer countries, like Japan and those in Europe and North America, employ most people in their service industries.
Three things are needed to make the economy of a country work: land, labour and capital, which are exploited by various enterprises to provide products and services. The three sectors of production: primary sector: farming, mining, fishing, forestry. The secondary sector processes the raw material from the primary sector. This means that they take the raw materials and transform them into goods and products. It includes manufacturing and construction. (food and beverage, textile, car industry, building). The tertiary sector involves the provision of services to final consumers and businesses. Types of industries in the tertiary sector are: retailing, the sale of goods from a store; banking and insurance; education.
Commerce is a general term used to describe the sale and distribution of goods and services. The commercial activity of buying and selling goods and services is called “trade”. Trade is divided into home trade, when goods and services are sold and bought inside a country, and foreign trade, when this commercial exchange happens between two different countries. In foreign trade we distinguish between import, when goods or services are bought from a foreign seller, and export, when goods or services are sold to a foreign buyer. Another aspect of commerce refers to the services which make trade possible, for example: banking, insurance, transport and marketing.
Trade involves the transfer of the ownership of goods or services from one person or entity to another in exchange for other goods or services or for money. Possible synonyms of “trade” include “commerce” and “financial transaction”. Types of trade include barter. A network that allows trade is called a market.
The original form of trade, barter, saw the direct exchange of goods and services for other goods and services. Later one side of the barter started to involve precious metals, which gained symbolic as well as practical importance. Modern traders generally negotiate through a medium of exchange, such as money. As a result, buying can be separated from selling, or earning. The invention of money (and later credit, paper money and non-physical money) greatly simplified and promoted trade. Trade between two traders is called bilateral trade, while trade between more than two traders is called multilateral trade.
Trade exists due to the specialization and division of labor, in which most people concentrate on a small aspect of production, trading for other products. Trade exists between regions because different regions may have a comparative advantage (perceived or real) in the production of some trade-able commodity, or because different regions’ size may encourage mass production. As such, trade at market prices between locations can benefit both locations.
Retail trade consists of the sale of goods or merchandise from a very fixed location, such as a department store, boutique or kiosk, online or by mail, in small or individual lots for direct consumption or use by the purchaser. Wholesale trade is defined as the sale of goods that are sold as merchandise to retailers, and/or industrial, commercial, institutional, or other professional business users, or to other wholesalers and related subordinated services.
Trading is a value-added function: it is the economic process by which a product finds its end user, in which specific risks are borne by the trader.
Trading can also refer to the action performed by traders and other market agents in the financial markets…
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