Module 1

• Economic System - Process that involves the production, distribution and consumption of goods and services by organizing labor, capital & natural resources between entities in a particular society.
• Economic System - Method used by society to produce and distribute goods and services
• Economic System can be planned, capitalized, or mixed
• Planned Economy - (aka Command Economy). This economy is controlled by the government (e.g. Communist; North Korea, Cuba, Venezuela); This system places people first, and not profits first hence there is economic equality. The prices are revenue-based & not market-based
• Capitalist Economy - The freedom of capitalist to operate for profit under competition; This involves the private

  ownership of production, distribution, and trade. In this system demand is the sole driver of production and pricing. Examples: Singapore, NZ, Australia, Switzerland, USA
• Mixed Economy - This economic system where the state has authority on some important production (military, transportation, international trade, energy, banking, health care, retirement programs). Other production industries are left for private enterprise.
• The production flow begins with obtaining raw materials needed in the modern economy made possible by extractive industries.
• The raw materials obtained in this process may be utilized as it is; however, they usually proceed to manufacturing so it would be transformed into usable goods and services.
• They then proceed to distribution industries and goods are eventually delivered to consumers, institutional buyers, and even exports, either by direct retail trade, or by indirect means through intermediary trade.
• Services are provided for all the mentioned processes and trades, the furnishing of services is always present, aiding in the entire cycle and ensuring that all the processes are carried out appropriately
• Intermediary trade involves goods that do not directly go to final destination (e.g., Wholesalers, Brokers/Agents). This includes brands that purchase a product and sell it under their own brand; They develop distribution networks where originally there is no access. At worst, these middlemen act as rent-seeking (an economics term referring to players who increase their share of the wealth without increasing value).
• Essence of Economic Process - It shows the cycle or

  flow of goods and services happening in any economic system.
• People tend to render service or make goods and in return they use the products (good or services) of others.
• Four major process that cover material activities of people in an economic system

  -Raw materials are manufactured

  -Raw materials and manufactured goods are passed from producer to consumer

  -Process that provides raw materials

  -Process by which people renders variety of services at every point in an economic system
• Extractive or Primary Raw Materials Industries

  provide material or goods for other producers and consumers.
• Example of Extractive Industries

  Agriculture

  Mining

  Lumbering

  Hunting

  Fishing
• Minerals and Fuels - Blackboard, glass, locks,
• Grains and other vegetable and animal products - Barley, rice, oats, bread,
• Leather, hides and skin - wallets, shirts, jeans,
• Stone, Sand and Clay - Sand papers, pots, jars,
• Wood, cotton, flax and fibers - piano, chairs, tables,
• Lumber - Doors, chairs, tables,
• Manufacturing process - transform materials or parts into products of greater usefulness to others who will purchase these products.
• Two Classes of products in Manufacturing Industries

  Semi-Manufactured

  Finished Goods
• Semi-manufactured - Goods partially fabricated passing from producers to producers
• Finished Goods - goods to be sold to the ultimate consumers
• Distribution Industries -

  facilitate the passage of goods from the crude raw materials through many stages of processing and manufacture to the ultimate consumers.
• Service Industries - exhibit this process like domestic, financial,

  professional, mechanical, general public and government services.
• The need of organizing economic life springs from the fact that man’s needs and wants are unlimited, but means of satisfying those are scarce.
• All four fields of economic activities are mutually dependent parts of the larger whole, the national economy.
• There is no such thing as a self-sustaining economy. This is the reason

  why there is a need for international exchange of goods and services.
• A country thus carries the cooperative cycle beyond its border by taking part with other nations in the international exchange of goods and services