Unit 5 Business world

What is economic activity?

We all need to feed, get dressed, a place to live ... They are the basic needs. Over time, the basic needs are expanding; for example, health and education are currently considered essential.

Economic activity is the set of jobs that people do to cover their basic needs.

Three elements are distinguished in economic activity: production, distribution and consumption. 

The company 

Most of the products and services we need to live are provided by companies.

A company is an organization that offers products or services in exchange for a benefit.

The main objective of companies is to obtain an economic benefit, although some also pursue a social good.

To carry out their activity, companies need:

• Human Resources. They are the people who work in companies.

• Material resources. They are the necessary elements to produce a good or a service: raw materials, machinery, technology, energy ...

• Financial resources. It is the money that the company needs to carry out its activity.

Different types of companies 

All companies are not the same. Therefore, they are usually classified according to the sector in which they carry out their activity or according to their size.

According to the sector 

• Companies in the primary sector. They are dedicated to obtaining resources from nature. For example, an agricultural company.

• Companies in the secondary sector. They transform raw materials into finished or semi-finished products. For example, a textile company.

• Companies in the tertiary sector. They offer services. For example, a store.

According to the size

• Small companies. They employ less than 50 people.

• Medium-sized companies. They work between 50 and 250 people.

• Large companies. They have more than 250 people employed.

How are companies organized? 

A company is like a big puzzle in which all the pieces are necessary to complete it. Therefore, companies have different areas or departments. For example:

• Purchases. Acquire what is necessary to carry out the activity.

• Production. Make the product or service offered by the company.

• Human Resources. Organizes and manages the company's workers.

• Marketing. Publicize the product or service among consumers.

• Financial. Control the expense and income of the company.

• Direction. Organize and coordinate the different areas to achieve the company's objective.

What is the publicity? 

Every day we see and hear numerous commercials on television, on the radio or when we surf the Internet.

Advertising consists of informing the public of the different products or services offered by companies or institutions.

In most cases, advertising encourages us to purchase a product or service with the goal of increasing a company's sales and profits.

However, advertising is also used to educate or report beneficial behaviors.

For example, advertisements that recommend us save energy, care for the environment, or warn us of the protocols we have to carry out during a pandemic.

Generally, it is public institutions, such as governments or town halls, and non-profit organizations (NGOs) that carry out advertising for educational purposes.

What is money? 

Thousands of years ago human beings bartered, that is, they exchanged some products for others to get what they did not have and needed. Over time, they discovered that bartering had some drawbacks.

For example, products were not always available to make exchanges and it was not easy to calculate the value of things either. Then, the money came up.

The money is usually obtained in exchange for a job, the sale of a product or a service, or a loan. The sum of all the money we have is our income. We can use our income to consume, that is, to buy products or services, to save or to invest.

Money is a means of payment accepted by all people that facilitates the exchange of goods and services.

Different forms of money

Money can come in different forms: cash, bank cards and electronic means of payment.

The cash. It is the name given to the set of notes and coins that we use regularly. The currency used in Spain (since 2002) and in other countries that are part of the European Union is the euro.

The credit card. It is a plastic card with an identifying number and a magnetic strip or microchip. It is used to pay the amount of a purchase. When doing so, said amount is charged to a bank account where we have deposited our money. 

Electronic means of payment. They are the ones that we can use to buy and sell on the internet. They have recently emerged due to the development experienced by new technologies. 

What is a budget? 

Making a budget helps us manage the money we have well.

A budget is a calculation that shows us what money we have to cover our expenses and, therefore, helps us decide how we are going to use our money.

To make a budget, we must follow three steps: 

• Add all our income: salary, loans, pay ...

• Add all our expenses: transportation, clothing, food ...

• Subtract from our total income our total expenses.

When we calculate a budget, we can find three situations:

What is savings? 

Saving consists of saving a part of our income to meet future needs.

Each person decides how much of their income they want to spend and how much they spend to save. You can save for different purposes: to acquire or rent a home, to expand studies, to face a medical emergency, to take a trip during the holidays, to buy a bicycle ...

Savings depend fundamentally on two elements:

What is consumption? 

One of the possible destinations of people's income is the consumption of goods and services.

Consuming means choosing and acquiring a series of goods and services to satisfy our needs.

To consume we must take into account two elements:

• The income we have, because you have to pay a price for goods and services.

• Our tastes and preferences also influence consumption. Since the income we have is limited, we must decide what goods we can acquire and not.

What is investment? 

Sometimes, people can buy something, a painting, for example, with the aim of selling it later and make a profit on the sale. This is making an investment.

Investing is allocating a part of our income to obtain a profit or gain. This gain is called profitability.

The investment supposes to assume a risk, since the benefit that we are looking for is not assured. It may be that you earn a lot, that you do not earn anything or even that you lose everything. But, when we invest, we risk our income in hopes of earning more in return.