What is the economy? Concepts, types, and characteristics - GovtVacancy.Net

What is the economy? Concepts, types, and characteristics - GovtVacancy.Net
Posted on 20-10-2022

What is the economy? Concepts, types, and characteristics

Economics is a very broad discipline since it encompasses the different socio-economic systems by which governments are based to direct their nations, as well as the schemes that organizations and individual agents use in their economic core.

Definition of economy

Economics is a science that studies the production, distribution, marketing, and consumption of goods and services by the agents that participate in an economic system.

The economy, then, is mainly composed of 4 factors:

  1. Production: It is the activity that provides added value through the creation of products and services.

  2. Distribution: Includes all operations from a product that has been produced by a company until it has been purchased by a consumer.

  3. Trade: It is the exchange of goods and services between entities that are part of an economic system.

  4. Consumption: It is the acquisition of products or services to satisfy the needs of different kinds. Like, for example, the purchase of food that the food industry makes available to us.


Types of economy

  • Capitalist economy: It is a socio-economic system in which the main element is private property. In this system, the means of production are private. And it is the market that allocates resources according to the law of supply and demand. Money is the means by which goods and services are acquired, to create a business network and to reward the work done by others.

  • Socialist economy: It is a system based on social equality. It is a panorama that pursues a common benefit, rather than an individual benefit. Resources are managed in such a way as to promote a social and balanced interest. The means of production belong to the workers.

  • Mixed economy: It is a scheme that combines elements of the capitalist economy and the socialist economy. It is based on the fact that this model uses the market to allocate resources, but the use of these is regulated by the government.

  • Traditional economy: It is an economic model based on tradition. It is characterized by its simplicity compared to more complex economic systems. They are generally adopted by urban and agricultural areas.

  • Authoritarian economy: It is an economy imposed by an authoritarian entity, therefore, its economic foundations are typical of a dictatorship.

  • Market economy: It is a system based entirely on the law of supply and demand. That is, the production and consumption of goods and services is determined by the behavior and needs of the market.


Characteristics of the economy

  • The economy is a model to intelligently manage the limited resources that are used to satisfy diverse individual or group needs.

  • Economics is one of the oldest disciplines in existence.

  • The economy is, in turn, a social science, since it studies human behavior under the different elements that intervene in an economic system.

  • The word “economy” comes from the Greek word: oikonomia. Which, in a direct translation, would mean “household management”.

  • Economics can apply to governments, businesses, families, and individuals.

Sectors of economics studies

The economy is mainly divided into 2 study sectors:


It is responsible for studying the global economy of an economic entity. It covers a large number of variables and is generally used to analyze and achieve the economic objectives of a nation.


It is responsible for studying the economy of individual entities. These entities are together in the macroeconomic equation, but it is microeconomics that analyzes the individual economic behavior of these agents. It includes companies, workers, consumers, and investors.

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