What is economic activity? Definition and examples

Economic activity is the activity of making, providing, purchasing, or selling goods or services. Any action that involves producing, distributing, or consuming products or services is an economic activity.

Economic activities exist at all levels within a society. Additionally, any activities involving money or the exchange of products or services are economic activities. For instance, running a small business is a great example of economic activity and one you can learn more about at MultipleStreams.org.

Employees working in a factory and receiving wages, for example, are performing economic activities. Their employers are also economically active because they pay the workers and make and sell goods.

The term contrasts with non-economic activities. When somebody goes to a temple to pray or meditate, for example, they are performing a non-economic activity. So is helping a friend study if you receive no money for that help.

Economic Activity

Economic activity – two definitions

There are many ways to define the term.

The University of Toronto’s Department of Economics has the following definition:

“Economic activity is the process by which the stock of resources or stock of capital produces a flow of output of goods and services that people utilize in partial satisfaction of their unlimited wants.”

“This process involves not only the production of goods and services but their distribution among the various members of the community.”

If Toronto University’s explanation is too complicated, perhaps you’d prefer Cambridge Dictionary’s simpler definition:

“The activity of producing, buying, or selling products or services.”

Economic activity – main aim

One of the main aims of economic activity is to produce goods and services to make them available to consumers.

All activities which we perform in exchange for money or things of value are economic activities.

Put simply; economic activities are those which we undertake to earn income, money, or wealth.

Unlimited wants vs. scarcity

With these activities, we secure the greatest satisfaction of unlimited wants with scarce and limited means.

‘Unlimited wants’ is an economic term. It refers to human’s insatiable appetite for things. Humans never get enough because there is always something else that we want or need.

However, even though we have unlimited wants, the resources we have available to get them is limited. In other words, the things we want are scarce.

Scarcity, which has plagued us ever since we first set foot on this Earth, has two halves:

  1. Limited resources.
  2. Unlimited wants.


GDP is the sum of every economic activity in a country. GDP stands for gross domestic product.

It is the most important economic measure of the state of a country’s economy. With one simple figure, we can tell whether an economy has grown, shrunk, or remained the same since one year ago.

In other words, GDP tells us whether economic activity has increased, declined, or remained flat.

Economic activity – classifications

Economists say there are four basic types of economic activities:

  • The Primary Sector, i.e., raw materials.
  • The Secondary Sector, which includes industry and manufacturing.
  • The Tertiary Sector, i.e., services.
  • The Quaternary Sector, which we also call the ‘knowledge sector.’