The Role of Business in Society and the Economy. Businesses play a vital role in our lives – they not only create the goods and services we need and want, but they also provide employment opportunities and compensation (in the form of wages, salaries, and benefits) to citizens which in turn becomes a source of income that can be used to sustain their life.
Businesses are important to our society and economy as a whole, and we rely on them to continue operating smoothly in order to maintain our quality of life.
Businesses operate in many different ways, but they all play a role in the economy. The primary sector businesses extract natural resources, such as mining or farming. They usually produce raw materials, which are inputs for businesses in the secondary sector.
The secondary sector transforms the raw materials into finished goods. The tertiary sector provides services to consumers and businesses, such as transportation or tourism.
Others operate in the secondary sector where they take raw materials and process them into either intermediate or final products.
Intermediate products are then sold to other businesses who will further process them into final products before selling them to consumers. Final products are meant for final consumption and don’t require further processing to be beneficial.
Tertiary sector businesses offer services that differ from those in the primary and secondary sectors. These businesses provide services such as retail and wholesale trade, tourism, and financial services like banking and insurance. Not only do they provide services to businesses in the primary and secondary sectors, but they also offer them to individual households.
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How does business play a role?
Businesses buy inputs, such as raw materials, from suppliers and convert it into output to sell at a higher price. This is called value-adding, wherein businesses convert lower-priced inputs into higher-priced outputs. We use the output to fulfill our needs and wants.
Businesses buy raw materials from suppliers, which they then convert into a higher-priced output. This is called “value-adding,” where businesses take lower-priced inputs and turn them into something worth more.
Outputs are then used to fulfill our needs and wants. But what exactly are needs and wants? Needs are items that we must have in order to survive, like food and shelter. Wants are items that we would like to have, but don’t necessarily need, like a new car or a fancy coffee maker.
needs are items or services that are essential for our survival. An example of a need would be food, water, clothing, or shelter. Wants are items or services that we would like to have but are not essential for our survival.
For example, we may want a vacation or a new smartphone, but we would be fine without them. Standard clothing is a necessity, but we may want luxury clothes if we can afford them.
What inputs are used?
In a broad definition, inputs for a business include not only raw materials, but also the four resources necessary for production – land, labor, capital, and entrepreneurship. To successfully operate, a business requires all of these factors.
For example, land is necessary for factory and office locations, natural resources are necessary for raw materials, workers’ physical and mental effort is required, and capital in the form of machinery and equipment is needed to assist production. Finally, entrepreneurship – our attempt to establish a business by taking risks and bringing together all of these factors – is essential.
What are the role of business in society and the economy?
The role of business is essential to our society and economy – they not only satisfy our needs and wants through the products they produce, but they also create jobs and income.
Competition between businesses encourages innovation and efficiency, making goods and services cheaper and of higher quality. Businesses are the lifeblood of our economy, and we rely on them to provide us with the items and services we need to live our lives.
Satisfying our needs and wants
Businesses are essential for our society because they provide the goods and services we need to live comfortably.
They also spur competition which, in turn, leads to businesses becoming more efficient and innovative in order to keep customers satisfied. This benefits everyone because it drives prices down and quality up.
Businesses are essential because they provide us with the goods and services we need and want. If businesses didn’t exist, we would have to produce everything ourselves. Can you imagine having to make your own clothes or grow your own food?
Businesses also have to compete with each other to stay afloat. In order for a business to make money, they must deliver a higher level of satisfaction than their competitors. This competition drives businesses to be more efficient and innovative, which leads to lower prices and better quality products for consumers.
Living standard improvement
businesses play an integral role in enhancing the quality of life for individuals. This is done through various means:
First and foremost, businesses provide the goods and services that we rely on to fulfill our needs and wants. Secondly, businesses create jobs and with those jobs comes income. This money can be used to buy various goods and services to satisfy our needs and wants. It can also be invested to support future needs, such as during retirement. Finally, we can use this money to purchase insurance, which will help minimize losses we may experience.
Third, healthy competition among businesses leads to lower prices and higher quality goods and services for consumers. Businesses must outperform their competitors in satisfying their customers, forcing them to be more efficient and innovative.
It ultimately benefits consumers by making our lives more comfortable and better because we can get lower prices and higher quality products as a result.
For example, we can capture and photograph our best moments with mobile phones without buying a camera. In the past, we couldn’t do it. This is because manufacturers didn’t used to embed high-resolution cameras into phones. But now, thanks to competition driving businesses to be better, we can enjoy this convenience!
Community empowerment
Some organizations seek to balance between profit, social and environmental responsibilities. They don’t just go for the gold, but rather reinvest profits into social and environmental causes.
For example, microfinance providers raise money through crowdfunding and lend it to small entrepreneurs on flexible terms and low-interest rates. This allows small businesses to thrive, creating more jobs and income for the neighborhood. Then, microfinance providers use the profits to expand the reach of their services to communities elsewhere.
By doing this, they help create a stable system that benefits everyone involved – from the business owners to the workers to those in the community who will have greater access to goods and services.
In other scenarios, social enterprises help to uplift a community by teaching them valuable entrepreneurial skills. Not only that, but they also assist the community in marketing and selling their products – with the sales money then going back into the community to provide even more training and to help build up essential public facilities like schools and hospitals.
