A large set of inter-related activities that revolve around production, consumption, and exchange activities. Through this we see the allocation of resources that are available.
This most often is analyzed based on a particular geographic area. We see this through the lens of local, national, and global.
Economies can be:
- Market-based - buyers and sellers determine what is produced
- Centrally Planned - a select group of people, usually tied to the government, decide what is produced
The Soviet Union was an example of a centrally planned[economy while the United States, to a large degree, is market-based.
There are many factors that go into an economy. Here are some of the larger components that create differences:
The interaction between these areas have a direct impact upon how well, or poorly, an economy can do. When we factor all these together, it is easy to see why turning economies is not an easy task. Much of what happens is tied to the foundation of the nation.
An economy is made up of 4 sectors. They are:
- Primary : agriculture, extraction of raw materials, fishing
- Secondary : manufacturing of finished goods
- Service : retail, banks, IT, entertainment, finance
- Quaternary : Knowledge and education
There is also the public aspect to an economy which entails the spending by governments and the associated institutions.
Some believe the digital economy is becoming the dominant factor for any economy. This is all the goods and services tied to the Internet. It is part of a blending pattern that is taking place. For example, Tesla sells all its cars online, meaning the order is placed digitally. The vehicles exist in the physical realm and have to be delivered to the customers.
Technology is helping to advance this with many goods converted to the digital realm. Corporations such as Netflix and Spotify appeared on the scene, altering the distribution mechanism.