Science for dummies: how the activities of the main participants of the economy are interconnected


The economy is a complex, multi-component system, all the subjects and processes of which are dependent on each other. The interaction of the participants (subjects) is associated with the operation of economic laws and is based on the principle of limited resources. But it should be considered in more detail how the activities of the main participants of the economy are interconnected.

Consumers and producers in the economy

Participants in economic activity can be divided into consumers and manufacturers. At the same time, the same participant in different economic processes may act in both forms. It depends on what role it will play in the particular process. Before considering how the activities of the main participants of the economy are interconnected, it is necessary to consider in more detail who these subjects are.

Subjects of the macro level and the level of the national economy (microeconomics)

Economic entities, or main participants of economic activity, can be identified both at the macro level and at the micro level. Within the national economy, the state and the public sector will occupy the upper level, and the human level (as the most dynamic and flexible participant in the economy) will occupy the micro level. Within the framework of the international economy, the macro level will comprise the entire world economy, which is an even more complex system of interconnections of all countries of the world.


Participants of economic relations

  1. Man as an economic unit of all processes, on the decision and the choice of which the economic processes of the micro level are built.
  2. Households - is an association of persons (may consist of one person). In the household, economic decisions, choices, consumption and production processes are carried out collectively. This means that there is a certain balance of interests between members of the economy. Within the framework of households, not only consumption of economic goods can occur, but also their production for the purpose of sale. Production and consumption at this level is related to the benefits of the consumption structure of each household subject. In other words, the goal is to maximize the satisfaction of needs.
  3. Firms, as participants in economic relations, accumulate financial and production resources and attract workers. The main objective of the company - cost-effective functioning, that is, making a profit. All production and consumption of the company is directed to this.
  4. The state can be considered as a special economic participant. On the one hand, it acts as the same consumer and producer of goods and resources, since there are state-owned enterprises and institutions. On the other hand, the state is the guarantor of compliance with the rules and regulations in the economic field, develops regulatory and legal documents, and oversees the creation of competitive conditions for all participants. Great importance is attached to the state in regulating the processes of the economy, supporting other economic actors during periods of recession and restraining the economy from “overheating” during periods of growth.


The reasons for the interaction of economic entities

All listed participants, one way or another, interact with each other. It is important to understand how the activities of the main participants of the economy are interrelated. As is known, the distribution of any resources that can only be determined is uneven, and access to them is different for different actors. That is, each participant has a set of resources that the other does not have, in the right quantity for certain purposes. Therefore, the economy and its main participants can be represented as a model of a cycle of resources and benefits, when each participant is interested in another subject. This model demonstrates that the factors of production and the results of production go through the cycles of creation, distribution and consumption. At each stage there is an involvement of certain resources and subjects of economic relations.


How is the activity of the main participants of the economy interconnected, the subjects of which can be viewed from the standpoint of producer and consumer? A manufacturer cannot exist without a consumer and vice versa. Consumer requests for the necessary goods create a production system and a set of manufacturers. In economics, their relationship is determined by the mechanism of matching supply and demand. When the producer’s offer is supported by the consumer, an equilibrium is reached and a deal is concluded between the two subjects.



The economic system is multi-component, it harmonizes the interests of many participants, answers the question "what, how, for whom and in what quantity to produce?". Considering how the activities of the main participants of the economy are interconnected, you begin to understand the basic economic processes.

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