II. Some simple reminders for trainers about general economics, market economies and management
Economics is an essential component of human activity. It covers those occupations that men and women undertake in order to provide for their material needs. Economics is also the science that studies and explains this activity, defines the laws governing it and provides guidance for the men and women who have to make decisions, i.e. choices.
Material needs may be:
- tangible assets: food, houses to live in and bicycles to move about by, machines and equipment to enable these needs to be met;
- services: financial (banks and insurance companies), education and training (schools and training centres), health care (dispensaries, doctors and hospitals), transportation, repair and maintenance and leisure services.
Trade, the supplying of goods to meet demand, is one of the most important services.
Economic activity in some developing countries still consists mainly of supplying material goods to meet basic needs - food for home consumption, for instance. Such economies would be called agriculture-based or primary economies, but even here, trade is playing an increasingly important and dynamic role.
Also, even though economics is defined as the area of human activities geared to meeting material needs, it in fact touches upon all human activities, including non-economic ones such as art, culture and sport, as they require economic support or have a bearing on economic activities.
In times gone by, people lived "closed circuit" existences, producing and consuming what they produced. They obtained the goods they did not produce through the barter system, e.g. they would exchange a chicken for salt or cereals for milk. This was the economy of the closed society.
Nowadays, division of labour and trade exist even in the countryside; people sell to others what they produce and purchase from others what they consume. Economic activity has developed into a trading network where people are doubly dependent on each other: to meet their needs and dispose of their goods. Production and consumption are separate activities, but sustained by distribution and marketing. No longer can a peasant exchange his chicken for aspirin, or obtain a bicycle in exchange for two or three sheep.
All economic activities have a monetary value: for goods, this is called the price; for human work, the salary or return; for services, tariffs or charges; and for capital, rates of interest. Whatever the name, they are, in fact, always prices.
Price setting involves complex factors, the most important of which is the supply and demand situation of any given product: when the supply of a good or service is limited but demand is high (an unusual situation) the price rises; when supply is up and demand down, the price falls.
Farmers, school teachers, traders, industrialists and craftsmen are all economic operators: they produce goods or offer services, and consume both.
All economic operators are interdependent: between producers and consumers there is a system for circulating and distributing goods and services. More especially, there is a marketing system.
Goods and services have a price, which is dependent mainly on supply and demand.
The production - circulation - distribution complex is known as the market economy