The resources collected from the Earth and its environments have activities performed on them that transform them into the products of the economy. These may be such activities as smelting, cutting, machining, welding, painting, assembly, transporting, storing, and retailing. These are economic activities, and they comprise the economic process.

Between the collection of resources from the Earth and its environments, and the consumption of its products, the economic process has three stages: production, distribution, and consumption. Activities of the economic process are divided amongst these three stages like this:

A more complete economic process involves many internal forward and backward flows.  For instance, when the raw resources of iron ore and coal are collected from the Earth they may be used to make steel. Instead of being used to make consumer goods, some of that steel will be used to make the haul trucks that are used to collect the iron ore and coal (a backward flow) and some of it will be used to make the delivery vans that will transport the consumer goods to the distributor's warehouse and to the retailer's shop (a forward flow.)  However, overall, a direction of flow from start (resources) to end (consumption) is always maintained.

These haul trucks and delivery vans are used entirely within the economic process: they are never consumed as an end product of the economic process: they are tools used only to make the products that are to be consumed.

When the steel made from the iron ore and coal that is collected from the natural world is used to make multi-million dollar haul trucks, multi-thousand dollar delivery vans and 5 cent tin cans, only the tin cans are products of the entire economic process because only they will be used by a consumer who doesn't intend to use them for further economic activity to make a profit from them. Part of the cost of the haul trucks and the delivery vans must be recovered with the sale to a consumer of every tin can.

For an economy to function, the entire economic process must be completed from beginning to end for it to produce the products that pay for the process.

This page is linked from:

consumption

why the economy is all about consumption

what the economy is

decoupling the economy from resource use

decoupling with a service economy

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