What is economy definition. The economy briefly

In the modern world in conversation repeatedly uses the word economy. People try to argue about the financial situation of different countries, trying to grasp the essence of science is so difficult. Should at least roughly understand what the economy, to be able to support a conversation.

what the economy

Economics as a science

If you wonder what the economy, you should start to look at the etymology of the word. It is taken from the Greek language where it literally can be translated as «the art of homemaking».

Although Economics is a science in itself, define it as a set of social Sciences that aim to study the production and distribution of various services. All this is divided into theoretical and applied components.

Economic theory studies the peculiarities of metabolic processes and is also involved in the implementation of scarce resources. Applied Economics appeared before our era, in the time of Xenophon, who created the «Domostroy». It recorded the views of this ancient Greek writer on the economy – and this is one of the first works of this kind.

The term «Economics» is spread only in the mid-nineteenth century when it was used in the title of his work John Stuart mill.

This science became an independent even for a hundred years before, with the publication of «Wealth of Nations» by Adam Smith. However, Joseph Schumpeter noted that economic phenomena were considered before the appearance of this book, however, it happened on an intuitive level.


Why do we need Economics?

Besides theoretical and practical, there are also many features of the economy. These include cognitive, philosophical and even ideological. Modern Economics deals with the issue of unlimited human needs and severe limitations of available resources.

In this regard, this science is forced to consider certain aspects and to make serious decisions. It concerns the following questions.

  • What to do? Modern realities do not allow us to provide each person with everything. In this regard, we have to make decisions what and in what volume you want to create.
  • How to produce? Almost every thing can be done in several ways. The economy is designed to select the best from the point of view of efficiency and other criteria.
  • Who should do what? This science also deals with the social division of labor.
  • For whom to produce? One of the most challenging issues that directly depends on efficiency. The distribution of goods associated with the exchange process.

What is Economics?

The definition of what economy is connected not only with science but also with the direct use. The word also refers to the economic activities of society and the relationships that result from exchange and production processes. The economy briefly can be defined as the relationship from the point of view of cost.

It was created in the first place, in order to make certain benefits that people need, required for their further development. Such economic activity can satisfy the needs of people in a limited amount of resources.

The economy is divided into levels, sectors and forms. Levels vary depending on the scope of activities. For example, microeconomics refers to the separate enterprise. Macroeconomics affects the whole state, and interekonomika includes several countries in the world economy.

There are three main economic sectors. Primary is agriculture, fishing, creation of forests, hunting and mining. In the secondary part finishing and construction. The tertiary sector is the service sector. Also relatively recently, some have started to provide the Quaternary sector based on information technology, marketing, financial operations, and education. Any sector can also be divided into private and public.

the definition of Economics

The shape of the economy

There are four main forms of economy.

  • The market economy is based on the principles of free enterprise. It is characterized by a large variety of ownership, market pricing, and contracts that involve business entities. In this case, the structure of the distribution is determined by those who buy the goods, and also suppliers.
  • The administrative-command economy in another way- planned production is notable that all resources are considered public property, and their distribution takes place centrally.
  • Traditional economy – an ancient form. In this case, land and money are common, and society addresses issues of production, based on tradition and hierarchy.
  • Finally, the mixed or hybrid economy is a combination of corporate, public and state ownership. In this case, individual entrepreneurs and individuals can make some decisions from the point of view of Finance, but their power is limited by the state and society.


Leaders from the point of view of the economy are defined in countries in terms of GDP, is gross domestic product. This macroeconomic indicator reflects the cost of various goods and services for the year.

As of 2016 the leader in GDP (which, however, has not changed for long enough) is the United States. They are followed by China, and the third Japan. Russia is not included in the top ten, although typically in the 12-13 position.


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