English and Business Papers

Economic Activity

Arranged by:

Gasela Desriani Rante

223402546418

Management Study Program

Faculty of Economics and Business

National University

2022
 CHAPTER 1

PRELIMINARY
A. Background

Economic activity is an activity that cannot be separated in everyday life. Economic activity
forces the perpetrators to compete to meet each other's needs. Every individual has the same
rights in fulfillment of their needs. However, these various activities have rules that apply,
including government policies that provide limits for each individual so that be rational in
carrying out their economic activities.

Various economic activities are carried out by humans to meet needs and satisfactions in life
such as activities production, distribution, and sale of goods or services to obtain income and
profits, all these activities are called activities business. Business is one of the business activities
carried out by person or business entity (company) regularly and continuously in the form of
activities to procure goods and services or facilities to be traded or leased with the aim of benefit.

Economic needs is one indicator of a person carry out economic activities to gain prosperity
in family, taking into account the abilities, efforts and each other's wishes. Or in other words,
how communities (households and companies) manage resources rare through a wisdom-making
and implementation. Economics can also be defined as all that concerns matters relating to
domestic life, of course, what is meant by household is not just referring in a family consisting of
husband, wife and children, but also a wider household, namely households that broader, namely
the household of the nation, the state and the world. Activities economics also includes activities
to use goods and services produced in the economy. Thus the activities of economics can be
defined as the activities of a person or a company or a society to produce goods and services and
consume (use) these goods and services.

Economic activities consist of production, distribution and consumption. In fact, production,

distribution and consumption activities is a series of economic activities that cannot be separated.
The three do influence each other, but must recognized that production is the starting point of the
activity, it will not there is distribution without production. Production activities cannot be
separated from human daily life, this is because of the close relationship between production
with the development of income and improvement of living standards, which affect the glory of
life and a prosperous life for individuals and society. Production activities in economics
interpreted as an activity that creates benefits (utility) both in now and in the future. Production
activities are economic activity that combines various strengths through a certain processes that
are carried out continuously by an institution effort. Which aims to meet human needs both in the
form of goods and services.

B. Formulation of The Problem

1. What is the meaning of economic activity?

2. What is the principle of economic activity?

3. What are the types of economic activities?

4. What is the purpose of economic activity?

5. What are the characteristics of economic activity?

 Chapter II

Discussion

A. The Meaning of Economic Activity

Economic activity is human action or behavior that aims to meet the needs of life and is
based on economic principles. Another understanding is the individual's actions in making
choices and using opportunities in meeting their needs. Economic activity refers to the activities
of producing, buying, selling and distributing goods and services that involve monetary
transactions. In other words, it can be interpreted as a process in which the stock of capital or
resources generates a flow in the output of goods and services that individuals can use to fulfill
their needs. This whole process involves not only the production of goods and services but also
their distribution among different individuals in a community.

Economic Activity Actors

In carrying out economic activities requires actors. Without these actors, economic activities
will not run optimally.

1. Family household
2. Company
3. Country
4. Society

B. Principles of Economic Activities

In general, economic principles include 3 main things, namely:

1. Production Activities Production activities are activities to produce goods and services.
The purpose of production activities is to meet the needs of consumers and earn profits
for producers.
 2. Distribution Activities Distribution activities are activities to distribute products or
services to reach consumers. The parties who play a role in this activity are agents or
wholesalers.
3. Consumption Activities Consumption activities are activities carried out by consumers to
fulfill their daily needs. This activity includes the use of goods and services.

C. Types of Economic Activities

In people's lives, economic activities have several types, namely consumption economic
activities, production economic activities, and distribution economic activities.

1. Consumption Economic Activities

In the Big Indonesian Dictionary (KBBI) consumption is the use of manufactured goods
(clothing, food, and so on). Consumption economic activity is an activity where we are using or
using a product or service that has been produced by the producer. In this case, the goods or
services used by every human being to fulfill their needs and every human being will be referred
to as a buyer or consumer.

Everyone's life needs will usually always be the same. Therefore, a consumer will consume
his goods repeatedly, unless there is a new need for life. For example, home, clothing (office,
school, home), food and beverages, school books, and others.

The thing that needs to be underlined in consumption economic activities is that a consumer
is not necessarily a producer, but a producer can be sure that he is a consumer. This is because a
producer will become a consumer when buying the main ingredients of the production process.
For example, tofu producers will buy the best soybeans so that the tofu produced is good too.

The greater the level of consumption in a society, it can indicate that the community is
experiencing prosperity or prosperity.
 Factors Influencing Consumption Activities

Basically, every human being when carrying out consumption activities is very adapted to
his life needs, so the consumption activities between one consumer and another are also
different.

In addition, there are several factors that can affect a person's level of consumption, namely
income, prices, habits, tastes, and substitute goods.

a. Income

Income is a result of work obtained through work or tasks that have been completed. This
income can be in the form of wages (employees), rent (shop or houses that are rented or rented),
and profits (entrepreneurs who make a profit).

When viewed from the form, the income received by each person is different, so that the
consumption activities of each person will be different as well. For example, the needs of an
entrepreneur will be different from the needs of an employee.

b. Price

It is not foreign anymore if the price factor greatly influences consumption activities. In fact,
for some people in buying something need to look at the price factor. In addition, the price factor
can determine the target market of a production of goods or services.

An item or service that experiences an increase in price can cause a demand from consumers
to decrease. While a good or service that experienced a decrease in price can increase demand
from consumers. For example, when the price of soybeans increases, the prices of tofu and
tempeh will also increase, but the buyers of tofu and tempeh will decrease.

Therefore, when a production experiences a decrease in price, consumption should be

increased. Meanwhile, when prices rise, consumption needs to be reduced.
 c. Habit

A person's living habits can be influenced by many factors, ranging from lifestyle,
environment, and needs. This life habit can be said that can affect different levels of
consumption. For example, frugal living habits and extravagant living habits.

Someone who has a habit of living extravagantly will increase consumption activities.
Meanwhile, someone with frugal living habits, consumption activities are stable or even tend to
be low.

d. Appetite

Individual tastes vary from one individual to another. These different tastes are usually
caused by a person's psychological factors that can change at any time. The tastes of each person
will affect the level of consumption. For example, someone who has a hobby of reading books
will always try to find interesting new books.

So, it can be concluded that a person's taste will determine whether the level of consumption
is getting higher or lower, especially with regard to goods and services. The higher the
individual's appetite for something, the higher the level of consumption will increase.
Meanwhile, if the individual's appetite for something is lower, the level of consumption will be
lower.

e. Substitute Items

It is not foreign anymore if there is an increase in the price of an item, then someone will
replace it with a cheaper item. This happens because someone will consume goods according to
their income.

The existence of these substitutes will affect the level of consumption of an item. In short,
the more people who use substitute goods, the less consumption of substituted goods.
 2. Production Economic Activities

In the Big Indonesian Dictionary, production is the process of removing the results, income,
or manufacture of an item. Therefore, production can be interpreted as an activity that can
improve an economy by making production so that the needs of human life can be met.

In carrying out economic activities, production definitely requires sacrifices in the form of
spending funds in order to produce or create quality goods or services. Quality goods or services
can attract the attention of consumers to buy these goods or services.

Meanwhile, in production economic activities, there is such a thing as a producer. Producers

are usually addressed to people, business entities, or organizations that can create goods or
services that can be used by consumers.

If you are able to produce your own production, either goods or services, then you can
already be said to be a producer. For example, there is a person who has been able to produce
bread food which is then sold to his friends.

Factors Affecting Production Level

Economic activities of production cannot be separated from the so-called factors of

production. Factors of production can affect the rise and fall of the level of production, such as
human resources, natural resources, and capital resources.

a. Human Resources

In producing goods or services, it cannot be separated from what is called human labor.
Human labor is a human activity related to the production process in order to create quality
goods or services. Therefore, in producing goods or services, it is better to use quality human
resources.
 Based on their quality, human resources can be grouped into three, namely:

1). Educated workforce (skilled labor)

Educated workers are workers who get their knowledge or expertise through formal or non-
formal education. For example psychologists, doctors, accountants, lawyers, researchers, and
teachers.

2). Trained labor (trained labor)

Trained workers are workers who get their knowledge or expertise from the results of
training and experience during work. For example, drivers, technicians, cooks, mechanics, and
others.

3). Unskilled and untrained labor

Uneducated and untrained workers are workers who only rely on physical abilities and
spiritual strength. For example porters, sweepers, farm laborers, scavengers, and others.

b. Natural resources

It is undeniable that natural resources are natural factors that can be used to meet the needs
of human life and become a factor in economic production activities. In other words, good
natural conditions and quality will produce a good and quality product as well.

Many goods have been produced from natural resources, ranging from hands, air, water, to
mining products. All of these natural resources can improve the community's economy, but on
the other hand, it can damage natural conditions. So, we must be wise in using natural resources.

1). Soil natural resources

The natural resources of the land are usually used for agriculture, plantations, factory
buildings, residences, and road construction. From natural resources land will produce products,
such as potatoes, rice, fruits, housing, toll roads, and so on.
 2). Air natural resources

Air natural resources are closely related to aviation, especially when reading wind direction.
Meanwhile, in agriculture, natural air resources are very useful to adjust what plants are suitable
to be planted in an area.

3). Water natural resources

Natural resources water is often used to produce a production, such as transportation,

irrigation, and electric power. Electric power from natural water resources is very beneficial for
people's lives, especially people who have not received electricity supply.

4). Capital Resources

In increasing the amount of production and improving the quality of production, capital is
always needed. Therefore, capital is a factor of production activities. For example a farmer who
needs a hoe, fertilizer, and seeds to produce a product. In the production process, capital can be
in the form of equipment and materials.

Based on its use, capital is divided into two, namely current capital and fixed capital. Current
capital is capital in the form of goods that can be used more than once in production. For
example land, factory machinery, buildings, and others.

Meanwhile, current capital is capital in the form of goods that can only be used once in a
production process. For example, fuel oil.

Based on its form, capital is divided into two, namely concrete capital and abstract capital.
Concrete capital is capital that is visible when doing production. Examples include machines,
buildings, and raw materials. While abstract capital is capital that is not visible when doing
production. Examples include knowledge, expertise, product brands, and knowledge.

5). Entrepreneur Resources

Entrepreneurial resources can be said to be entrepreneurship. Factors of production that

come from entrepreneurship in the form of someone who is an expert in arranging cooperation
between natural production, capital, and labor. In short, an entrepreneur is someone who has
been able to control all factors of economic activity of production, especially in increasing the
quantity and quality of products.

3. Distribution Economic Activities

In the Big Indonesian Dictionary, distribution means distribution, distribution, or delivery of

daily necessities to several people or places. In short, distribution is an activity that aims to
distribute goods or services from producers to consumers.

Distribution economic activities are usually carried out by institutions or individuals

depending on the needs of each producer. Institutions or individuals who carry out distribution
activities are known as distributors.

Usually the distribution activities carried out by distributors are very diverse, such as trading,
transportation, and storage.

Factors Affecting the Level of Distribution

a. Market factor

Market factors greatly affect distribution channels, especially those caused by consumer
buying patterns.

b. Item factor

The goods factor is very considerate in terms of goods seen based on the size and weight of
the goods, the standard of the goods, the units of goods, the goods are easily damaged or not, and
the way of packaging the goods.

c. Company factor

Company factors are very considerate of various things, such as sources of funds, services
provided, and company management in managing the company.

d. Habit factors in making purchases

This habit factor greatly considers the financing of the delivery of goods, sales volume, and
manufacturer's discretion.
D. Purpose of Economic Activities

1. Consumption Economic Activities

There are several objectives contained in consumption economic activities, namely:

a. Give satisfaction to yourself

b. Spending the use value on an item gradually
c. Spending the use value of an item at once.

2. Production Economic Activities

In carrying out production economic activities, of course, there is a purpose. The following are
the goals of production:

a. Produce or create goods or services that are useful to consumers

b. Improving the quality of an item or service
c. Increase the profits of a business so that the company can grow
d. Improving people's welfare
e. Can create jobs

3. Distribution Economic Activities

Distribution economic activities have several objectives, including:

a. Distribute goods from producers to consumers safely

b. Can meet the needs of the community for an item
c. Guarantee production continuity
d. Production results can be used by consumers properly
E. Characteristics of Economic Activities

The main characteristics of economic activities can be summarized as follows:

1. Economic Motives

The main motive of economic activity is to earn profit and consequently acquire wealth.
These activities are carried out by individuals to earn a living through economic gain.

2. Use of resource

Carrying out economic activities requires the utilization of resources such as land, labor,
capital, etc.

3. Rational Use

Economic activity involves maximizing profit by rationally allocating scarce resources. This
includes optimal utilization of land, labour, capital and every other factor involved in production.

4. Legally Binding

Activities undertaken for monetary gain can be called economic activities only if they are
legally valid. For example, activities such as robbery, theft, smuggling, etc., cannot be included
in the field of economic activity because they violate the law.

5. Socially Acceptable

Economic activities carried out must adhere to social norms. They are unlikely to be socially
unwanted.
 CHAPTER III

CASE STUDY OF ECONOMIC ACTIVITY

1. Economic activities In the plantation sector

Economic activities in the plantation sector are usually related to planting and planting
activities. From these activities will produce an item that can be sold to consumers. For example,
mango gardens, oil palm plantations, and others.

2. Economic activities in agriculture

Economic activities in agriculture in general cannot be separated from the soil factor. Good
soil conditions will produce good yields as well. For example potatoes, carrots, rice, and others.

3. Economic activities in the industrial sector

Economic activities engaged in industry are usually in the form of business activities carried
out by individuals or institutions that process raw materials into finished goods or semi-finished
goods. Take, for example, a bakery.

4. Economic activities in the service sector

Economic activities engaged in services are closely related to a service. For example,
hospitality, banking, insurance, and transportation services.

CONCLUSION
Economic activity is very dependent on many things, ranging from resources, market
conditions, condition of goods, and geographical location. In addition, new economic activities
will move if the actors have carried out their functions and roles properly. The most important
thing from economic activity is to be able to run the economy.