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History

The earliest economic activity centered around food gathering and animal hunting. During the Stone Age, which lasted until about 11000 years ago, early humans wandered in tribal or family groups, hunting animals for food and picking nuts, berries, and fruits where they could.

All of this continued until an agricultural revolution occurred. Through a gradual process of thousands of years, people eventually domesticated wild plants and animals. This meant that people would then graze the animals like sheep and use them for their own needs. Humans could now have a reliable supply of food which in turn improved people’s lives and provided leisure time. This revolution could then be used to develop other activities, such as bureaucracy. The demands of crops and herding animals also encouraged people to remain in one location, so villages and towns began to develop. That was the first human economic activity as trading was first performed among people. The food grown by individuals now would not only be used to feed themselves, but if they had more than they needed they could trade for other needed equipment. Continued improvement in agricultural technology—such as the plough, the tractor and better farming techniques—led to even better lives for people. The new technology improved crop yields and food quality, and also resulted in better methods for storing, transporting, and selling food. One result of this technological change was that people had more time to do other things beside produce food. They could become craftspeople, working with metal wood or cloth. Or they could host other things, including teaching, developing laws, practicing medicine, or leading their growing communities. These new crafts and skills that people developed from the leisure time they created from the new farming techniques, generated jobs and money. For example metal workers could sell their products to farmers and they would either barter with food, or would trade with capital money). The money would then keep flowing around the community and the economic activity would increase.

Modern Economic Activities—Industrial Revolution and Urbanization

The modern era for economics started around 1700 A.D. It was that time when a second agricultural revolution took place. Farmers began to apply new scientific knowledge to producing food, especially through the use of machines and equipment. This drove the development of manufacturing, and the Industrial Revolution was underway in the 1800’s. This revolution dramatically changed economic activities. Huge numbers of people were no longer needed as food producers. Many moved from farms to cities to find work in the new factories that were springing in there. Cities became the focus of economic activity during the Industrial Revolution. Urbanization shifted the population from the countryside to the cities. Cities that were built on manufacturing grew and expanded. By the beginning of the 1900’s, more and more people were working jobs not related to agriculture and manufacturing. This created the different types of industries (primary, secondary, tertiary). These jobs were created to provide consumers in the cities with services such as entertainment, shops and stores, banking and insurance.

All these revolutions and changes in economic system have brought us to today’s economy. There are 4 types of economic systems: traditional, command, market and mixed. Economic systems is the way economy works. The 4 basic resources to an economy are land, labor, capital, and technology. Land refers to all natural resources that we use to make something such as minerals, energy, water, or land. Labor refers to human energy, efforts and talents that go towards making something. Capital is money— money invested in machinery, buildings and the like. Technology includes all resources that are not natural resources, such as scientific knowledge which allows decisions to made. These are the world’s economic systems:

1) Traditional economy is an economy in which decisions are made based on what has been done in the past. People organize their economic choices by following their religion, custom and tradition. An example of how traditional economy worked would be if there was a new road to be built, elders might be consulted and the decision would be made according to the tradition of the people.

2) Command economy is an economy where decisions are made by a central authority, such as dictator or a government. Citizens are required to carry out these decisions with few personal choices. An example would if a new industry was to built there, people in power decided if it fit into their plans and if it met their needs. The citizens of the country would have to carry out these commands. A country that follows this economic system is North Korea.

3) Market economy is an economy where decisions are made by all members of the society based on their own needs and desires. Citizens make their own choices through buying and selling in the market place. If a factory were to be constructed, decisions would be made by a corporation, based on whether or not profit could be made. The government might or might not be involved. A country that uses this type of an economic system is the United States.

4) In mixed economies decisions are made within a system that has aspects of both market and command economies. Governments, businesses and individuals are all included in the making of the decision. So, if there was an automobile manufacturing industry to be built there, the decision to construct a road would be made after discussions among governments, businesses and consumers. The decision would rest in the hands of any of these groups. Canada is an example of a mixed economy.