What is economy

What is economy

19.121 group’s student Marjona Ergasheva

An economy is the large set of inter-related production, consumption, and exchange activities that aid in determining how scarce resources are allocated. The production, consumption, and distribution of goods and services are used to fulfill the needs of those living and operating within the economy, which is also referred to as an economic system.

The word economy is Greek and means "household management." Economics as an area of study was touched on by philosophers in ancient Greece, notably Aristotle, but the modern study of economics began in 18th century Europe, particularly in Scotland and France.

The word economy is Greek and means "household management." Economics as an area of study was touched on by philosophers in ancient Greece, notably Aristotle, but the modern study of economics began in 18th century Europe, particularly in Scotland and France.

The Scottish philosopher and economist Adam Smith, who in 1776 wrote the famous economic book called The Wealth of Nations, was thought of in his own time as a moral philosopher. He and his contemporaries believed that economies evolved from pre-historic bartering systems to money-driven and eventually credit-based economies. During the 19th century, technology and the growth of international trade created stronger ties among countries, a process that accelerated into the Great Depression and World War II. After 50 years of the Cold War, the late 20th and early 21st centuries have seen a renewed globalization of economies.

Market-based economies allow individuals and businesses to freely exchange goods through the market, according to supply and demand. 
The theoretical basis for market economies was developed by classical economists, such as Adam Smith, David Ricardo, and Jean-Baptiste Say. These classically liberal free market advocates believed that the “invisible hand” of the profit motive and market incentives generally guided economic decisions down more productive and efficient paths than government planning of the economy. They believed that government intervention often tended to lead to economic inefficiencies that actually made people worse off.