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Principles of business

Section 1……. The Nature of Business

The Development of Early Economies

Early economies satisfied their primary needs for food, clothing, shelter and
protection directly from nature. Food came from animals, trees, the seas and the
earth. For example, they hunted animals for their meat and skins, which provided
food and clothing, respectively. They gathered berries, and raided the shrubs and
grasses for peas and beans. Fishing in rivers and watercourses provided fish and
seaweeds.

Food for thought: Imagine you were living in a primitive society, list five items
you would use as food, and the source for each item. Clothing was provided from
animal skins, for example, wool from sheep. Branches and leaves from trees, and
mud and stones from the Earth were used to build huts. Tools and weapons were
made of animal teeth and bones, branches and small stones. Spears, for example,
were made from tree branches. Utensils such as bowls for storing water were made
from clay and stones or provided from the cleaned-out insides of seeds such as the
coconut. Grass was used to baskets.

Animal bones, horns and items such as elephant tusks were used to make eating
and drinking utensils. Wood and stones were used to make firesides for the cooking
of food and provision of warmth. It is therefore very clear that our early ancestors
satisfied their needs directly from nature, hardly altering the original state of
the goods by cooking or applying any form of processing. Economists
refer to this type of existence as the direct satisfaction of wants. An economic
system where needs and wants are satisfied directly from nature is referred to by
economists as a subsistence economy.

A subsistence economy continued for thousands of years, until groups of hunters


and gathered found it convenient to abandon their nomadic way of life and settle
down on the banks of rivers, streams and waterways. This act of settling down
created the conditions necessary for a more orderly and peaceful existence in
which family units could thrive by gathering food, caring for plants that they found
in the immediate environment and learning to cultivate and tend crops for
themselves. The problem, however, was that no one area provided all the goods to
satisfy the needs of families, who were forced to specialize in whatever crops were
native to the area they inhabited. As such, a system was developed whereby tribes
would begin to exchange their goods for those they were unable to acquire
themselves. This system whereby goods are exchanged for other goods is called
bartering. While bartering solved some problems, there were many drawbacks.
There were four distinct advantages and disadvantages with the barter system.

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