How does a country's economy work

Economy basics / definition

economy is a generic term that includes all institutions and activities that have to do with the production and distribution of goods or the provision of services.

Economic actors include:

  • Companies
  • consumer
  • public institutions

The economy serves the purpose To satisfy human needsthat he cannot satisfy himself in a society based on the division of labor.

Since it is not possible for the residents of a city, for example, to meet their needs for food, clothing and other essential goods themselves, the production and provision of these goods must be guaranteed by the economy.

Principle of supply and demand

An essential criterion for a functioning economy is a supply according to demand. One of the greatest political controversies of the twentieth century has been how to do this. Planned economy systems with politically centrally controlled production competed with market economy systems. These rely on the fact that in a free economy every demand automatically leads to a private provider creating a corresponding offer.

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The article "Basics" is in the category: Business & Economics

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