Basic Economic Process

2011-48334
2009-13799
Abstract
This paper discusses the basic economic
process, which consists of four major processes,
namely the extraction of raw materials, their
manufacturing process into finished goods, the
distribution of these goods, and the services
involved along the way. The basic economic
process essentially makes up the economic life
of a certain nation as they produce goods and
perform services in return for the goods and
services they do not have.
Introduction
The basic economic process is made up of four
major processes, which are the extraction of
raw materials, its process of being turned into a
more useful product, the distribution of this
product, and the services offered to those who
are performing these processes to make things
easier, less tedious, and more practical.
Main Discussion
There are four major processes that cover the
material activities of any entity in an economic
system.
It starts with the extraction of the raw
materials, which is then bought by
manufacturing companies to turn into finished
goods. Along the way the manufacturing
company would require several services to
produce the goods. After this, the goods are
then bought by local shops to be distributed to
the public. Again, the process of transporting
the finished goods and many other services

would be required by the distributors. This is

also known as the chain of production (1).
There are companies who would do all three by
themselves, but those who dont do so, doing
only one of the three, are said to be practicing
specialization.
The provision of materials covers the extraction
of raw materials from a natural source, such as
the chopping of trees to produce wood that will
be used to produce furniture or charcoal, or the
mining of minerals to produce accessories,
gadgets and many other items. The enterprises
involved are those that are engaged in
agriculture, mining, lumber, hunting, and
fishing. They are often called the extractive or
primary raw material industries. Their primary
work is to provide materials for producers or for
consumers. Extractive industries each have
their own raw materials to find, and these raw
materials have five characteristics that will
determine what kind of extractive industry they
will become, and these are demand, relative
scarcity, geographic concentration, specific
geographic and ecological location, and
technology of extraction and refining (2).
The second process after raw materials are
extracted is the manufacturing or producing the
finished products from the raw materials
provided by the extractive industries.
Manufacturing is a critical factor in achieving
technological advances today, for it is one of
the major things that produces a nations
material wealth (3) The basic function of
manufacturing industries is to reproduce the

raw materials into its more useful form. Imagine

how useless oil would be without anyone to
process it. There are two different classes for
manufacturing industries.
The first class is the semi manufacturing
industry, which only manufactures the goods
partly, so that it can be passed on to the next
producer for further processing, such as the
production of flour from wheat. After it is
turned into flour, it would then be sent to
another manufacturer that will turn it into
bread.
The second class is the manufacturer that
processes materials into their finished form.
They would then sell these products to the
distributors, which is the third major process of
the basic economic process.
The third process composes the distribution of
the manufactured goods of the manufacturing
industry. A distributor acts as a medium that
connects the consumers to the producers.
Distribution channels, a path where goods and
services flow towards the consumer and
payments towards the distributor, such as the
Internet, exist between distributors and
consumers (4). It would be challenging to
introduce the finished product to the
consumers locally after subjecting the material
to several processes, so it would be best if it
was handled by another business entity, which
composes the distribution industries. Their
main purpose is to store, sort, grade, package,
and move items to a concentrated area where
they are needed the most. Imagine if local
convenience stores did not exist and you
needed some kind of necessity in the middle of
the night. Manufacturing industries wouldnt
spend so much as to provide emergency needs,
but some distributors do.

The last major process in the basic economic

process is the provision of service. The service
industries provide the service of products in
use, the production and distribution of energy,
and the transportation of products, materials
and people. Their general purpose is to make
life easier for anyone who would hire them,
whereas without these service industries, the
entities that needed their services wouldve
spent more time and/or energy on the work.
Examples of services are domestic, financial and
professional, mechanical, and general services,
which covers utilities. It goes through the
process of shaping or non-shaping, which
This is what a basic economic process goes
through. As how these processes are dependent
upon each other, thats how dependent our
economy is as well globally.
A similar concept exists as well, and this is
known as the Three Sector Hypothesis (5). It
states that there are three sectors, which are
the primary sector (agriculture and mining),
secondary sector (manufacturing), and the third
sector (servicing). There is no separate sector
for distribution since in this concept, it is
considered as a service. The hypothesis explains
that as the goods and services move from the
primary sector to the third sector, employment
and economic contribution shifts along with it.
Conclusions
The basic economic process is what keeps our
economy alive as it finds a way to circulate the
resources. It may not evenly circulate it, but its
better than not circulating at all. This is what
defines the strength of the economy.
References
1.http://www.tutor2u.net/business/gcse/exter
nal_environment_economic_sectors.htm

2. Barham, B., et. al.(1994). States, Firms, and

Raw Materials: The World Economy and Ecology
of Aluminum. Wisconsin: The University of
Wisconsin Press, p. 16
3. Groover, M. P. (2009). Fundamentals of
Modern Manufacturing: Materials, Processes,
and Systems.4th ed. John Wiley & Sons, Inc.
4. Murley, L. and Wilson, A., (2012). The
Distribution of Goods and Services. 1st ed. New
York: The Rosen Publishing Group, Inc., pp. 4-5
5. Leseure, M. (2010). Key Concepts in
Operations Management. London: SAGE
Publications Ltd. p. 27