What is an Economic Activity?

Definition: Economic activity is a set of actions that produce, trade, sell or distribute goods or services with the involvement of monetary transactions. An economic activity groups similar endeavors that provide products or services to institutions or end consumers.

What Does Economic Activity Mean?

Economic activities differ from non-economic activities because the former are measured according to the money generated in the transactions while the latter doesn’t involve money at all. When economic activities increase in a country, they produce more money and allow economic growth. There are different ways to perform economic activities. A person can act as a professional, which means that he provides a service and is remunerated according to his specialized knowledge.

Other people serve as employees, who provide labor to an employer and receive a wage. Other cases are businesses, which are organizations that carry out for-profit activities.

Finally, an economic activity may also be classified like primary if they are directly related to agriculture, forestry and other natural resources; secondary if they are related to manufacturing, processing and construction; and tertiary if it is a service.

Example

In a small city of an Asian country, the new Major wants to know if the economy is growing. He knows that there are more stores and shopping centers now than a decade ago so he hired a professional to account economic activities. The city economy is mainly shaped by tourism so tertiary activities like restaurants and retailers are the most important. There are also small farms, which are primary activities, and some few manufacturing companies operating in the secondary sector.

They all work to earn money so the total money generated was totalized in a period to measure the economy. The economy was measured every year and it was possible to estimate economic growth. The Major confirmed that the economy was growing but he also had some interesting additional findings.

For example, he realized that farming was steadily declining while retailing was expanding. This was very useful for him because it allowed the municipality to develop programs to enhance the conditions of agricultural facilities within the city.