Abstract This chapter discusses the four major processes that cover the material activities of the people and industries within a society. It explains how efforts of people and machine are related and how it is necessary to produce goods that will be useful. Basic economic processes chapter introduces different types of industries and different classes of manufactured goods or products. It also enumerates some examples of raw materials and services.
Introduction Man naturally is a selfish being. We all have our certain needs, wants and preferences. In order to attain our basic needs and even the things and services we want we tend to pay for it or buy it. But have you ever wondered how, where and what does every single thing you purchase are made of? Or do you ever had chance or did have a chance to build a business? Did it ever occur to you why would you build that certain business and where would you get raw materials? Within a society it is necessary that there be a process to organize and coordinate choices regarding the production, distribution and consumption of goods and services (1). This arises because raw materials or resources within any country are finite and as well as there will always be some technological constraints (3). One of the processes involved in a society is the basic economic process which summarizes the flow or exchange of goods and services. This process is applicable to both local and international exchange of products and service.
Basic economic process encompasses the processes that provide goods from raw materials and semi- manufactured goods. It has four different processes. Within each process, different industries are involved such industries are extractive or primary raw materials industries, manufacturing industries, distribution industries and service industries. Different processes have different importance, depending on the nature of ones business through which industry will it be classified. Significance of the chapter Basic economic process is important because it completely explains how different enterprises and activities are interrelated and important to one another. It shows and explains how raw materials are processed to produce semi manufactured goods and finished goods. This chapter provides information how different economic activities are mutually dependent parts of the larger whole, the national economy. And eventually national economic activities will involve international exchange of goods and services. Understanding the basic economic processes will help us understand the essence of economic life. The essence of economic life states that people making goods and performing services while in turn they use the products and benefit by the services of others. Knowing and fully understanding such concepts will aid us determine industries that should and should not go hand and hand. Some industries will be helpful to another and some will not affect another enterprise. Eventually through these concepts providing quality product efficiently will be possible. Basic economic process will assist us too in avoiding or solving problems related to the process of producing quality goods and different goods from one raw material.
Objectives of the Chapter The purpose of this chapter is for the reader to: Understand and enumerate the four major economic processes. Understand the role of the people (services) and machines in the different processes. Describe and enumerate kinds of industries, raw materials and services. Understand the essence of economic life. Describe the interrelatedness and how dependent are the four fields of economic activities. Know the importance of understanding the basic economic processes.
Main Discussion Figure 1 shows how people are making goods and performing services while in turn they use the products and benefits from the service of others. This illustrates the cycle within any society in terms of exchange of goods and services. This is the essence of economic life.
Figure 1. Illustration of Basic Economic Process Four Major Processes of Material Activities of People in Any Economic System 1. Process that provides the raw materials needed in the modern economy. This involves extractive or primary raw material industries. This process also encompasses the creation, collection, or extraction of raw material for the production of goods and services, especially directly from the natural environment (4). In short, its main function is to provide material for other producers and consumers (2).
Extractive or primary raw material industries include enterprises engaged in: Agriculture Mining Lumbering Hunting Fishing
Examples of raw materials: Minerals and Fuels Grains and other vegetable and animal food products Wool, cotton, flax, and other fibers Lumber Stone, sand, and clay Leather, hides, and skin
2. Process by which raw materials are manufactured or converted into different forms (2). Manufacturing industries are responsible in this process. Its basic function is to transform materials or parts into products of greater usefulness to others who will purchase these products. Many enterprises carry on the manufacturing process.
Products produce in a manufacturing industry fall into two general class namely Semi manufacture and Finished goods. I. Semi-manufacture are good partly fabricated passing from producers to producers for further processing II. Finished goods are goods to be sold to the ultimate consumers An example of a raw material is cotton, which is harvested from plants. Cotton can be processed into rope. A rope can also be considered as a raw material. Then, the rope can be woven into cloth, which is a semi- finished material. Cutting and sewing the fabric turns it into a garment, which is a finished product (5). 3. Process by which raw materials and manufactured goods are passed from producer and from producer to consumers. This process is conducted by distribution industries. They facilitate the passage of goods from the crude raw materials through many stages of processing and manufacture to the ultimate consumers. Their operations are consisted of buying and selling as middlemen, storing, sorting, grading, packaging, and moving goods about to places where they are most needed (2).
4. Process by which people renders variety of services at every point in the economic system. Service industries exhibit this process like domestic, financial, professional, mechanical, general public and government services.
In one way or another some of the processes may overlap. For example company QQQQ is an extractive enterprise, company RRRR is a manufacturing enterprise, company SSSS is a distributive enterprise and company TTTT is a service providing company. Company QQQQ will provide raw materials for company RRRR. Company SSSS will serve as a middleman between company RRRR and TTTT. Company TTTT is the one responsible of distributing the finished product to the ultimate consumers. The need of organizing economic life spring from the fact that mans wants are unlimited, but means of satisfying those wants are scarce (2). Figure 2 exhibits how goods and services flow from individual to the society it belongs,
Figure 2. Illustration of how goods and services flow from an entity. The major processes of economic activities are mutually dependent parts of the larger whole, the national economy. And because the nation is not a self-sufficient economic unit, it carries this cooperative cycle beyond its border taking part with other nations in the international exchange of goods and services.
Summary and Conclusions The four basic major processes of manufacturing raw materials are illustrated by extractive industries, manufacturing industries, distribution industries and service industries. Each industry differs from another and within each industry people and machines have different functions and roles. But these different industries may complement each other in one way or another. Thus this major processes summarizes how people and machine works within a certain industry. There is a need for man to understand these processes in able to know the nature of his business and as well as the nature and role of different enterprises he might encounter within transactions. Each industry is important for every industry and to the society itself. Every society is part of a larger community. Therefore every industry is significant in a society. References (1) Encyclopedia Britannica. (1996). Retrieved June 19, 2013 from: http://global.britannica.com/EBchecked/topic/5509 24/social-change/222912/Economic-processes (2) Riggs, J. L. et. al., 1980, Industrial Organization and Management, 6 th ed., McGraw-Hill, Inc., NY. (3) Reynolds, L. (n.d.). An Introduction to the History of Economics. Retrieved June 19, 2013 from: http://web1.boisestate.edu/econ/lreynol/web/PDF_ HET/CHAPTER1INTRO.pdf (4) Raw Material Production. (1996). Retrieved June 20, 2013 from: http://www.hq.nasa.gov/iwgsdi/Raw_Material_Prod uction.html (5) Material. (n.d.). Retrieved June 20, 2013 from: http://en.wikipedia.org/wiki/Material
Individual Industries Local Community National Economy International Economy