In the modern society even in the globalization era, economic activity has some complex subjects. It involves many different agents of economic activity. The subjects that contribute in society’s economic activity as the agents of economy include family households, companies, cooperation, and government.
How many member of family do you have? You have father, mother, or sister and brother. Do you still have any other members of family? Mention them!
All the members of family have their own needs to fulfill. They needs foods, houses, health, televisions, phones as means of communication, transportation, and many more. Even, savings for the future needs is an important matter, isn’t it? Thus, a family is a consumer of goods and services.
To get goods and services, human needs some money as the expense. A father is a family leader who has to work to earn some money. He works as a government or private employee. Besides, he saves his money in a bank to get some interests in order to have more earnings. He possibly possesses a land for rent to a sugar company as his other additional funds. Furthermore, his growing family members make livelihood to have any other additional earnings. For example, elder brother works as an employee in a certain company. Thus, a family household plays a role in a process of production.
The above analysis can be concluded that a family household as the agent of economy has the following roles.
a. Consumer if Goods and Services
The previous example points out that all family members are the consumers of goods and services.
b. Supplier of Production Factor
The continuity of factor of production needs factor of natural production, factor of labour, factor of capital, and factor of entrepreneurship. From the example, it is clear that a family supplies factor of labour and factor of capital.
1) Labour. It can be viewed that a father works as a government or private employee and his son works as an employee of he pharmacy company.
2) Capital. It can be released in the form of
- father saves his money in a bank and then it is borrowed by a certain company to finance the process of production;
- a land rent by a company of the sugar cane plantation.
All the elaboration is the examples of the factors of production. It obvious that factors of production supplied by a household to another are different. It depends on the family ability and condition. Basic activity of economy by a family household is an activity of consumption. Therefore, a family household is called also as household of consumption.