Reviewed by Feb 19, 2021| Updated on
An economy is a system encompassing various sectors of the country. It is a large set of inter-related production and consumption activities that facilitate the movement of resources and conversion of resources from the stage of initial production to the stage of ultimate consumption.
An economy evolves based on the changes in society. As human beings evolve, their needs evolve, technology evolves, the demand for goods and services change. Thus, the composition of the economy changes with developments in society.
Each economy is different as to its nature and composition. The progress of the economy also depends on the composition of the economy.
An economy encompasses all activity-related to production, consumption, and trade of goods and services therein. An economy applies to everyone from individuals to business enterprises such as corporations or small and medium enterprises and governments. The economy of a particular region or country is influenced by the demographics of the place, culture, history, geography, and laws among other factors.
Market-based economies allow goods to flow freely through the market according to supply and demand. The United States is considered a market economy where consumers and producers determine what’s sold and produced. Producers own what they make and decide their own prices, while consumers own what they buy and decide how much they’re willing to pay.
There are different types of economies: Market economy, traditional economy, mixed economy and command economy. Market-based economies allow goods to flow freely through the market, according to supply and demand. The law of supply and demand can impact prices and production.
The production and consumption of goods and services are used to meet the needs of those living and operating within the economy of a country. Various sections of the country are interconnected and integrated. They cumulatively contribute to the development of the country.