An economy is a place of specialization, production and exchange, by other agents and means, of the production and distribution of goods and services. In economic terms, it is defined as a social community that emphasize the practices, discursive and material manifestations associated with the operation, utilization, and control of economic resources. It also includes the processes by which surplus production is created and allocated, the prices of traded goods and services, the allocation of capital, the accumulation of wealth or surplus, the allocation of land and other equipment, the regulation of investment, and the taxation of income and wealth.
In the basic conception of economics, it refers to the practical application of the principles of demand and supply, in the context of the operation of markets, for the determination of prices for goods and services of all kinds. The scope of economics is therefore broad, including such aspects as market structure, prices for production and output, technology, business cycles, government regulation, entrepreneurship, financial systems, international trade, and land property markets. In the light of these issues, various different types of economics have been developed.
A simple economy is the economy in which prices are determined solely by competition among sellers. In this kind of economy, the process of production is not affected by any exigency, since each unit of production competes only with other units of production. Therefore, prices are not influenced by changes in the amount of raw materials needed, the rate of interest, trade balances, national income, or other monetary concerns. A simple economy is characterized by a rapid rate of economic growth, with income coming mainly from sales of goods and services. This type of economy is characterized by high levels of employment and a standard of living good comparable to that of wealthy nations.
A modern economy is characterized by complex processes. Unlike the simple economy, complex economies are dependent on the operation of numerous interacting firms. Each firm brings its own unique contribution to the process of production, and the process itself is not determined by the level of competition among firms. Complex economies are characterized by a fast rate of economic growth, with income coming primarily from sales of goods and services, investment, and technology. In addition, complex economies are characterized by high levels of employment and a standard of living that is better than that of wealthy nations. However, the rate of economic growth is usually accompanied by growing levels of inflation.
A mixed economy is the mixture of a classical economy and a modern economy. Classical economies are the means of production of real goods, such as food, durable items, and energy. Modern economies are the means of production of money, such as bank deposits, consumer goods, financial securities, and short-term liabilities. Mixed economies include elements of both modern and classical economies. Because this mixture of forces results in a dynamic process, mixed economies are characterized by slow fluctuations in the economy-wide activities, which tend to be proportional to the growth rate of the economy.
A market economy is the mixture of classical and market economics. The classical concept of economics is defined by demand analysis, meaning the analysis of how people make decisions about the quantity and quality of goods that they must have. Market economics, on the other hand, is the branch of economics that studies the effects of changes in the supply of and demand for specific goods on the prices of those goods. These two branches of economics distinguish their methods of measurement, scope, and conclusions about how markets operate.
Business cycle is an economic concept, which studies the inter- connectedness of business cycles. Cycle identifies the four phases of a business cycle: accumulation, expansion, decline, and recovery. This branch of economics seeks to explain the factors that affect the accumulation and extension of a business cycle. Moreover, this branch of economics attempts to explain business cycles, identifying the factors that cause expansion and contraction of a business cycle.
Economic theory is concerned with how economic agents make decisions. Economic theory is a branch of business economy that studies the behavior of economic agents, who are the producers and consumers of goods and services. This includes economic agents of business enterprises such as business owners, workers, financial lenders, businesses, investors, managers, and creditors. The study of economic theory aims to provide a detailed understanding of how economic agents make decisions regarding production, consumption, investment, and saving of resources. This branch of economics seeks to provide a detailed understanding of how economic agents make decisions regarding production, consumption, investment, and saving of resources.