An economy is a field of interaction, production, distribution, and exchange, involving different producers and consumers. In its broadest sense, it is considered ‘a social community or sphere in which interaction and production co-exist and are determined by the demands of the society as a whole.’ Economists have attempted to narrow down the scope of an economy into a few key factors. These factors include economic structure (the state of the economy), financial instruments (such as capital assets, liabilities, receivables, inventories, capital supplies, and market prices), technology, marketing, human capital, government, ownership, and techniques.
A basic economics class should teach students how to measure the economy and how to relate it to other fields. In addition to economic theory, the study of how people in the economy interact is called microeconomics. Microeconomics studies how people, firms, institutions, and bodies in the economy to create, manage, and distribute goods and services on the market place. This can include marketing, production, pricing, distribution, financing, government, and the role of private sector in an economy.
Microeconomics also studies the interactions of producers and consumers in the market place who have diverse personal characteristics and tastes. The breadth of this specialization is wide and covers nearly all aspects of the economy. One might even venture as to say that all economic systems are micro-systems when we talk in this particular terminology. This specialization is further subdivided into five main subspecialties; markets, specializations, information technology, micro-business, and non-market specialization.
The first specialization is market specialization, which seeks to understand the unique characteristics of specific economic systems. For instance, in the case of the United States economy, the products and services produced by specific companies in specific geographic regions are considering a micro market. What makes a micro market unique, then? It is the fact that the economies produce and sell unique goods and services, so it stands to reason that there is no general macro economic system that can be applied across many such micro Economies. This specialization also includes knowledge about the international system of trade.
The second specialization is market specialization in the business or industry category. As one could suspect, this specialization deals with businesses. Micro-economics attempts to study business activity, where the economy behaves like a market system. This may be in the context of the business segment itself, where firms try to increase their market share by creating new products, services, or marketing campaigns. At the same time, these firms attempt to minimize their risk by diversifying into other types of goods or services that allow them to protect their interests and compensate for any losses.
Another specialization is that of human capital, which pertains to the characteristics of skilled and unskilled workers. Within the labor specialization there are two main subsets, skilled and unskilled. In the first category, humans refers to those who can produce and perform the functions involved in the business economy. Unskilled labor is that category, which consists of both skilled and unskilled workers. It is the productive and potential capacity of these categories of workers that gives these economies their distinct advantage over others.
Technological advances can further be divided into two subsets, engineering and information technology. While the former creates and utilizes objects and processes for the production of goods and the latter produces information systems, both branches of economy fall under the informal sector. The informal sector is made up of mainly of small businesses and other forms of organizations that do not make use of state apparatuses. However, as this group of economy continues to expand, these economies can become major players in international markets.
Finally, a brief description of the national income accounting system is needed in order to understand the nature of the economy. National income accounting uses data provided by economic systems to create estimates of national income. This process is done by computing gdp and gross national product or NPI, which is the measure of national income made from existing resources. The NPI measure of national income makes it possible to determine the strength of an economy’s economic system and gauge the state of its balance sheet.