What are economy and its types?

ECONOMY

Since ancient times, farmers have taken goods to markets, where customers bartered over prices and sales were agreed. Today the range of goods is massive, but the principles remain the same. Societies function by people working together to grow, build, manufacture, or distribute products for consumers who want them. Such a system, for the production, distribution, and consumption of goods, is called an economy.

  • PRODUCTION

Every country uses its raw materials and its people to make all kinds of products to sell. The best ways to maximize profit are to reduce production costs, pay the workforce less, and use the speediest manufacturing tools. As production increases, so the economy grows.

  • TRADITIONAL ECONOMY

In less wealthy countries, a traditional economy is more common. People produce a few goods for themselves and sell what is left. Rural farmers may grow produce such as fruit and vegetables to feed their families, and then sell the rest at local markets.

  • COMMAND VERSUS MIXED

The government takes control in a command economy, and is in charge of the country’s economic activity. However, in a mixed economy, some industries, such as health and transport, are publicly owned and run by the government, but the rest are privately owned.

  • RAW MATERIALS

Some goods are used to create a different product. These are usually raw materials or partly finished items, such as steel, coal, wood, and paper. These goods are often unrecognizable in the final product.

  • SUPPLY AND DEMAND

An economy works because there are people supplying goods and services to people who will pay for them. When there is a big demand, the price of these goods and services goes up, but if there is a huge supply, the prices drop to encourage the demand.

  • DOMESTIC WORK

Any unpaid work done at home is not counted as part of the economy. Housework, for example, only contributes to the market economy if a cleaner is paid for the job.

  • CONSUMER GOODS

Producers must recognize what people want in order to create consumer goods that will prove popular, sell well, and increase profit. A wide range of goods, such as cars, clothing, toys, and food, are offered by many different producers to ensure that individual consumer needs are satisfied.

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