The economy definition / What is Economy? The economy is a social science that studies the processes of extraction, production, exchange, distribution and consumption of goods and services. In a figurative sense, economy means rule and moderation of expenditure and saving.
What is Economy | Economy Definition
The word economy comes from the Latin œconomy , and this in turn from Greek οἰκονομία (oikonomia), which is derived from the union of the Greek terms οἶκος (oíkos), which means ‘house’, νόμος (nómos), ‘standard’.
The concept of economy encompasses the notion of how societies use scarce resources to produce goods with value, and how they perform the distribution of goods among individuals.
The scarcity of resources suggests the idea that material resources are limited and it is not possible to produce an infinite quantity of goods, taking into account that human desires and needs are unlimited and insatiable.
The resources, in fact, are sufficient, but the administration is currently being wrong. Gandhi once said: “On Earth there is enough to satisfy everyone’s needs, but not so much as to satisfy the greed of some.”
Based on this principle, the economy observes human behavior as a result of the relationship between human needs and the resources available to meet those needs.
The science of economics tries to explain the functioning of economic systems and relations with economic agents (companies or individuals), reflecting on the problems and proposing solutions.
Thus the investigation of major economic problems and decision-making is based on four fundamental questions about production: what to produce? when to produce ?, how much to produce ?, for whom to produce?
Microeconomics and Macroeconomics
In economics, two branches are fundamentally different: microeconomics and macroeconomics. The microeconomics studies the various forms of behavior in the individual decisions of economic agents (companies, employees and consumers), while macroeconomics analyzes the microeconomics processes, looking at the economy as a whole and with aggregate variables (total production rates of inflation, Unemployment, wages, etc.).
More from Business Study Notes:- Difference between Microeconomics and Macroeconomics
- Mixed Economy
As a mixed economy economic system that combines elements of the planned or directed economy, which is objectively and limits imposed by the state, and the free market economy known. It is also called the economic model in which the private property of capitalism and the collective property of socialism coexist.
- Political Economy
The concept of political economy emerged in the seventeenth century to refer to production relations between the three main social classes of the time: bourgeois, landowners and proletarians. Unlike the economic theory of physiocracy, whereby land is the source of wealth, political economy proposed that labor was actually the source of value, from which the theory of value- works. The concept of political economy was put aside in the nineteenth century, replaced by that of economics, which favored a mathematical approach. Nowadays, the term of political economy is used in interdisciplinary studies whose objective is the analysis of how politics influences the behavior of the market.
- Submerged Economy
As underground economy all this economic activity that is practiced outside the legal and tax controls are known. It ranges from unreported activities to the treasury, to illegal and criminal economic activities, such as trafficking in arms or drugs, or money laundering. Because they are economic activities carried out outside the law, they are not listed in the state’s fiscal or statistical records.
- Informal Economy
The informal economy comprises all economic activities, exchange of goods and services, which are hidden to avoid taxes or administrative controls. Like the underground economy, it is part of the underground economy. Some common examples of informal economy are domestic work or street vending. In all countries of the world, to a greater or lesser extent, there is the informal economy, even though this causes serious economic damage to the Treasury.
- Underground Economy
As underground economy, also known as black market, one that is made up of trade in goods, products or services clandestinely or illegally designated. As such, it is not subject to any legal regulations, so it often violates pricing or legal provisions that have been imposed by the government to trade such effects.