An activity may be defined as something that somebody takes part in or does. Also, an activity is that in which something is happening or a lot of things are being done. An individual performs several activities in his entire lifetime. However, human activities may be mainly classified as economic activities and non-economic activities.
Economic activity is undertaken in order to earn something in return, such as income. It is connected with the trade, industry and development of wealth. It has been defined as, “An activity involving earning and spending of income.” An activity to be regarded as an economic activity needs to meet two conditions: There must be an effort and the purpose should be to earn something in return. However, considering the first condition which entails making efforts, the selfless service of a father and the activity to teach or educate his children is not to be regarded as economic activity, as it does not involve earning something in return, but he does so out of love, affection and to build the future of his children. In addition, an economic activity leads to utilize scarce resources in order to satisfy unlimited wants. On the other hand, it leads to adjust wants with the resources.
As with the case of a business, it maximizes its output with the available resources.
Aside from economic activities, an individual performs various other activities called non-economic activities. They are: physical activity, ethical activity, spiritual activity or social activity etc. It must be noted that non-economic activity does not involve earning income and spending it. Neither it brings economic benefit nor does it give rise to trade and profit.
Economic activities may be classified as profession, employment and business.
Profession: Profession is the occupation that requires extensive education and specialized training. People practice different professions on the basis of high level of education and competitive skills. The objective of attaining professional qualification is to provide services and to earn income. Just to name a few professionals are: Doctors, engineers, lawyers, chartered accountants and consultants.
Employment: Having been employed in an organization and rendering services is another economic activity that enables individuals to earn money in return. Whether people belong to professional field or non-professional field, they are paid for the services they provide. They need to follow the formulated policy guidelines in order to be associated with a particular organization.
Business: The term, business, comes from old English which is composed of two words, “busy” and “ness”. The sense, state of being busy, was used from Middle English down to the 18th Century, but it is later differentiated as “busyness”. The former term indicates having a lot to do and the latter, as a suffix, shows the state. It is thus the “state of being busy”. It implies that individuals are busy and engaged in lots of activities to earn money and it involves them in the activity of making, buying, selling or supplying goods or services, it is regarded as a business. In this way, business is an economic activity which involves making efforts and earning money in return.
Managerial economics helps to develop leadership qualities which are necessary for every business. It helps in effective decision making thereby profiting the company.
Harsh economic environments can have adverse effects on your business, however, there are some important practices that can ensure that your business survives. .
Decision making is an integral part of management. Managerial economics helps in effective decision making and a business manager is essentially involved in the processes of decision making as well as forward planning.