Theory question 106
Basic Concepts(a) Distinguish between economic activities and an economic system.
(b) Explain the following terms: (i) production; (ii) distribution; (iii) consumption.
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(a) Economic activities are the things people do to earn a living or satisfy wants with scarce resources (production, distribution, consumption). An economic system is the way a society organises its resources and institutions to carry out these activities and decide what, how and for whom to produce (e.g. capitalism, socialism).
(b)(i) Production: the creation of goods and services (utility) to satisfy human wants, including moving them to consumers.
(ii) Distribution: the movement of goods from producers to consumers through wholesalers, retailers, transport, etc. (also the sharing of income among factors).
(iii) Consumption: the using up of goods and services to satisfy wants.
Activities are what people do; a system is how society organises them.