Business – 1.1 Enterprise – The nature of business activity | e-Consult

Economic activity encompasses all actions that involve the production, distribution and consumption of goods and services. It is regarded as the engine of a market economy because:

• It creates value by transforming resources into products that satisfy wants.
• It generates income for households and profits for firms, which in turn fund further investment.
• It stimulates demand and supply, leading to employment, innovation and economic growth.
• Through the price mechanism, it allocates scarce resources to their most valued uses, enhancing overall efficiency.