With respect to trade and commerce, all the activities can be divided into two forms. They are:
- Economic activities and
- Non-economic activities.
The branch of Economics studies and deals only with economic activities.
1. Economic activity:
- An activity performed with the purpose of obtaining economic benefits in the form of income is called economic activity. Activities involving exchange of goods, services and/or factors of production as well as involving costs are included in economic activity.
- Objective of obtaining economic gains, satisfaction of some want and involvement of exchange and cost are important aspects of an economic activity.
Examples of economic activities:
| Activity |
Economic gain |
| 1. Eating in a restaurant |
1. Satisfying need by incurring expense |
| 2. Watching a movie in a theater |
2. Obtaining entertainment by incurring expense |
| 3. Work in one’s own farm |
3. Putting labour and to get output and later money |
| 4. Working in a school as a teacher |
4. Providing service and obtaining a salary |
Looking at these examples we can also say that economic activity fulfills requirements of people through a transaction that involves costs and benefits on both sides.
- Farmers, lawyers, teachers, actors, government all perform economic activities.
- The following chain of activity is another example, to clarify the meaning of economic activity:
- Suppose a farmer needs a motorcycle.
- In order to earn income to buy the motorcycle, he works in his farm and sells his production to a buyer against money. With this money the farmer buys motorcycle. .
- The seller of motorcycle who earns money by selling the motorcycle spends it to fulfill some other want. This chain goes on and so does economic activities.
2. Non-economic activity:
- An activity which is done without the purpose of obtaining economic gains is called non-economic activity.
Unlike economic activities, such activities do not involve exchange of benefits on both sides of the transaction.
- Charitable activity, or activities done out of love, affection, compassion, such as social service, mother teaching her son, etc. are all non-economic activities. Although these activities may involve costs but these costs are not incurred to get monetary/economic benefits in exchange.
