Economic Activity and Maslow's Hierarchy

Economic Activity

• Economic activity encompasses the production, distribution, and consumption of goods and services within a society.
• It is influenced by needs, goals, and values, which vary across cultures and socioeconomic conditions.
• Needs are categorized as:
  • Natural: Essential needs arising from human biology.
  • Social: Needs influenced by self and social interaction, divided into radical (fundamental) and non-radical (belonging, friendship).
  • Essential/Primary: Natural needs combined with certain social needs.
  • Non-essential/Secondary: Social needs influenced by imitation, fashion, and expectations.

Maslow's Hierarchy of Needs

• Developed by Abraham Maslow, a pioneer in positive psychology.
• Outlines a theory of psychological health based on fulfilling innate human needs in a prioritized order.

Economic Activity and Management

• Involves transformation (e.g., manufacturing, banking, transportation) and complementary activities (e.g., institutional design, organizational and human resources management, accounting, information).
• The circular flow model shows money flowing in two directions: from producers to workers (wages) and from consumers to producers (payment for products).

Goods and Services

• Primary goods satisfy essential needs, while non-essential goods fulfill non-essential needs.
• Complimentary goods are required together to satisfy a need, whereas substitute goods can replace each other.
• Differentiating features distinguish differentiable goods from commodities, which lack such features.
• Consumer goods are for final consumption, while industrial goods are used to produce other goods.
• Disposable goods are used once, while durable goods have multiple uses.
• Individual consumption involves use by single individuals, while collective consumption benefits many individuals simultaneously.
• Public goods are non-excludable and non-rivalrous in consumption, while private goods are excludable and rivalrous.

Individuals and Business

• Owners contribute resources to businesses and manage operations or hire employees.
• Employees are responsible for tasks within businesses.
• Customers purchase goods and services.

Business Activities

• Management: Acquiring, developing, and utilizing resources, including people.
• Marketing: The 4 Ps (product, price, place/distribution, and promotion).
• Finance: Obtaining and effectively managing finances for business operations, often involving borrowing or attracting investors.

Entrepreneurs, Non-Profits, and Government

• Entrepreneurs are individuals who risk time, effort, and wealth to develop innovative products or services.
• Non-profit businesses provide goods or services but do not prioritize profit generation.
• The government:
  • Encourages competition.
  • Protects consumers, employees, and the environment through laws and regulations.
  • Minimizes economic fluctuations and unemployment.
  • Fosters growth to stimulate consumer spending and job creation.
• Non-profit characteristics:
  • Private entities not allowed to distribute profits or assets.
  • May serve private interests (e.g., trade associations) or provide public goods (e.g., philanthropic foundations).
  • Require expertise in management, marketing, and finance.
• Mini case study (Rao’s-Sovos):
  • Rao’s sauces are successful due to quality, premium marketing, restaurant image, positive testimonials, accessible luxury, variety, secret recipes, exclusivity, and their ability to provide a substitute for restaurant dining during inflation and the pandemic.
  • Sovos focuses on acquiring funding and investing in Rao’s sauces to ensure their availability to consumers.