In order to function normally in society, the population must drink, eat, shoe, dress, live in an apartment or house, etc. And since this does not exist in its pure form, people have to produce it. And on an ordinary level, it turns out that economics and production are one and the same.
But in a primitive, slave-holding or feudal society such a concept as "economy" did not exist. Production was then based on non-economic methods: coercion and violence. And getting the result became the main goal, which did not depend on the amount of costs.
Economic activity is impossible without production. Production participants must adhere to the principle of economic feasibility. In the conditions of such relations, the economy has a place to be. Thus, it needs to be linked to results and costs.
The ratio of these indicators expresses effectiveness. Economic activity should reflect the productivity of the entire society. And since the basis in such production is the satisfaction of citizens' needs, the effectiveness of the resulting product expresses the overall economic result.
Classification of types of economic activity (according to the all-Russian classifier of OKVED) is carried out according to certain criteria. They characterize a certain field of activity, technology and production processes.
Effective economic activity is a condition in which the needs of the population are fully satisfied. Moreover, the degree of satisfaction of the needs of one citizen cannot be increased due to the deterioration of the situation of another. This is called Pareto Efficiency in honor of the Italian economist. Productivity is the most important category of the economy.
There are 4 stages of economic activity.
1) Reproduction. This is a constantly repeating production process. It can be extended or simple. With the latter, production volumes do not grow, but with the former - vice versa. In today's society, of course, the extended prevails.
2) Distribution. It is the distribution of goods received as a result of production between members of society. This stage also includes the distribution of society members and means of production by industry and sphere, economic enterprises and regions, work sites and workshops. In this case, this stage is an element of production.
3) Exchange. An independent function, which is the movement of a product. In production, the exchange of abilities and activities.
4) Consumption. The final stage of product movement, which satisfies human needs. It includes personal consumption, which ensures the reproduction of labor, and creates incentives for improving production and further development. In addition, there may be production consumption in which materials are consumed in the process of creating products.
Thus, economic activity passes alternately through production to distribution, exchange, and then to consumption.
