Economic Agents

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Mrs.ET Sopheak
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Economic Agents

In economics, an economic agent is an economic decision maker and they can recognize that different factors influence and motivate in different aspect of the economy. Economic agents are classified in 4

1.Household: A household consists of one (or more) people who live in the same dwelling and share meals. It may also consist of a single family or another group of people. Moreover, they supply labor to get salary from firms.

2.Firm: Firm is an economic agent whose role is to transform factors of production into goods and services to sell. Firms try to maximize their utility (economic benefits) for their shareholders. To achieve this, firms use factors of production (land, labor, and capital)to produce goods and services, creating value and wealth. They demand labor from families and provides them a salary. Firms employ capital (machines, vehicles, computers, etc) in exchange for an interest, and land for a rent. Finally, they offer goods and services for the families, others firms or the government.

3.Government: Government is an economic agent which provides rules for how firms and consumers should interact.  They offer goods and services (mostly public goods and services like roads or national security) through national companies or in association with private firms. Governments demand goods from firms and labor from families. Moreover, the governments tax them based on its income, profits, wealth, etc. They can regulate prices, limit or prohibit the consumption of certain goods, create tariffs, to imports, incentive production etc. Finally, they distribute the wealth through social services in education, health and poverty programs.

4.Foreign/ External Sector: The external sector is the portion of a country's economy that interacts with the economy of other countries. In the goods market, the external sector involves exports and imports. In the financial market it involves capital flows.

Thanks
Mrs.ET Sopheak

Lecturer in Economics