Notes

• Management is a range of decisions associated with the acquisition, allocation and integration of resources (human, physical, financial, etc.) required to perform a certain economic activity.
• "Economic activity is the production and the consumption of economic goods".
• People aspire to a variety of goals at differing levels. The pursuit of these goals gives rise to needs. One way to satisfy these needs is through economic activity, that is, by producing and consuming economic goods.
• A large proportion of economic activity takes place in social bodies, which are aggregation of individuals.
• There are two completely different schools of economic thought which would evolve out of one or the other of the following hypothetical alternatives:
  • People are perfectly rational, isolated individuals who are motivated purely by self-interest. (Homo Oeconomicus)
  • People act as members of a group; they possess bounded rationality and can be moved by altruistic principles.
• The needs of the people can be divided in Natural and Social,
• Maslow gave us a pyramid describing their relations trough a hierarchy.

Goods can be divided between Economic goods and Free goods.

• Free goods are those that are not scarce.
• Economics goods are those that are useful but scarce. So they require human production. The economic goods have many other inner diversification:

There exists also an intersection between private and public, for goods extremely important for society like Hospitals, Education and Transportation. In this sector there is High competition and Low Prices.

The activities that are necessarily involved in the production of economic goods are:

• Technical transformation
• Transactions
• Complementary (Support Activities)

The technical transformation consists of physical, spatial and logical transformation of raw materials, systems, data or knowledge.

Production and consumption processes happen within various organizations. However, organizations are not economically isolated from one another; instead they are linked by a tightly woven network of exchanges.

The role of linking organizations to other organizations and individuals is covered by the transactions. Transactions are basically classified by what is being exchanged.

The majority of transactions involve private goods, financial resources, work, risk coverage (transferring the issue to an insurance company in change of money), and public goods, where individuals acquire access to them by paying taxes.

The processes of transactions lead to chains, which are usually supply chains, often creating vertical integration that can be downstream or upstream.

To conclude the general summary of major classes of processes which make up economic activity, one should keep in mind essential activities which are complementary to the technical transformations and transactions which all organizations carry out.

Such activities can be categorized as follows:

• Institutional structure design: founding and giving shape to the organization. (corporate governance)
• Organization and human resource management: organizing and managing people.
• Accounting and information management: keeping track of activities.