Definition: Economy is the term used for the production and consumption activities that take place in a nation seeking to efficiently allocate the nation’s resources for the public benefit.
What Does Economy Mean?
What is the definition of economy? Put simply the economies involve all production and consumption-related activities as well as the trade of goods and services in a country. An economy is often synonym of the economic system. Therefore, it includes the distribution of resources to the factors of production as well the labor and capital required for the production factors to produce an output.
Also, based on the openness of an economy, it is classified as an open economy and closed economy, or a planned economy where the government has the entire control of the factors of production and how they will be allocated like for example in the ex-Communist countries.
Let’s look at an example.
Example
A prominent example of an economy is the traditional economy that encompasses the customs and history of a nation to guide production and distribution of goods. Traditional economies are mostly based on agriculture, fishing, and hunting. Nowadays, there are some traditional economies, but mixed traditional economies are their contemporary successor.
A mixed traditional economy uses mostly cash and encompasses elements of capitalism as it allows ownership of production factors and control over the distribution of these factors in society. Moreover, other forms of mixed traditional economies are based on a nomadic style, encompassing elements of socialism, which allows the distribution of production to those who work for it.
Before the Great Depression in the 1930s, the economy of the United States was a traditional economy as 60% of its population lived on farms, whereas agriculture accounted for 40% of the workforce. Once the country entered the Great Depression era, the agricultural sector accounted for only 21% of the total workforce. In addition, before the Civil war in 1861, the American economy relied to a great extent on farming.
Summary Definition
Define Economies: Economy means the collective activities of producers and consumers in a region, market, or industry.
