The economy is a complex system of interrelated production, exchange and consumption activities. It uses capital, labor, and natural resources to produce goods and services for the benefit of the economy as a whole.
There are different types of economies that have their own characteristics. These include command-based, market-based, mixed, and traditional.
A market economy is a type of economy wherein goods are produced in response to consumer demand. In such a system, producers are rewarded for the most efficient methods of production.
Economies of scale refer to firms producing more products at a lower unit cost. When an economy expands, firms usually hire more workers, leading to more economic output. However, when an economy contracts, firms generally lay off workers.
Economics are a branch of science, which focuses on the function of human groups. The study tries to understand how well different groups of people interact with each other.
An economic contraction or recession is a period of significant decline in general economic activity. As a result, many people suffer from unemployment. They also face financial difficulties as a result of lost jobs and assets.
Another characteristic of the economy is inflation. Over time, the purchasing power of the currency will decrease. This will cause an increase in the average price of selected goods.
During the industrial revolution, the economy moved from subsistence agriculture to more industrially-oriented products. Competition from other nations increased and the role of subsistence farming decreased.