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What is an economic activity? Analyse with example.

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Economic activities: All those activities done by men to earn their livelihood and can be measured in terms of money are called economic activities. On the basis of material or things required for economy the main economic activities can be divided as follows:

(a) Production: Conversion of a raw material into finished goods which can be utilized to satisfy needs is called production. In other words creation of utility is called production. 

(b) Producer: Producer is a person who produces goods and services to earn profit. For example, a farmer does farming, here a farmer is producer and farming is production.

(c) Consumption: To satisfy needs directly by consuming goods and services is called consumption. The one who utilises the goods and services to satisfy his needs is called the consumer.

(d) Exchange: The meaning of exchange is to give self produced goods and services to others to satisfy their needs and taking goods and services produced by others to satisfy own needs.

In other words sale and purchase of goods and services by the consumer and producers in market is called exchange. For example, a consumer purchases wheat and pays for that to satisfy his needs.

(e) Distribution: To produce goods and services a producer needs some resources or means as land, labour, capital management and entrepreneur. Mutual Cooperation and combination of means help in production. Division of production among means is called distribution. Or in other words distribution of income earned by exchange of goods and services among different means is called distribution.

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