An economy is a physical space characterized by the total production, circulation, distribution, employment, and consumption of various goods and services by other agents. In simple terms, it is defined as ‘a social property system in which the production, circulation, distribution, employment and consumption of goods and services are controlled by the agents.’ The definition of an economy also includes the political organization and relationships between economic agents. Economists refer to a society’s economy as a living organism that is governed by the laws of demand and supply, the existence and structure of various institutions of production and the distribution of wealth.
Unlike the microeconomics which concentrates on a single industry or country, the macroeconomics extends beyond the market economy into the total economy of a nation. This type of economics describes the behavior of an economy at the level of the nation’s population and the world economy. For instance, there are the international trade and the international investment in goods, services and technology. The evaluation of the nation’s internal market and its external environment also falls under the scope of macroeconomics. Furthermore, many different types of economic activity are included in the scope of economics including the operation of the financial system, production and distribution of resources, information and communication systems and structure of the economy.
Economists believe that there are five basic models of the functioning of the economy: the market economy, the state economy, enterprise economy, intellectual property oriented economy and knowledge economy. The market economy operates through the mechanisms of demand and supply. State economies are organized around the creation of monopoly or public enterprise. Enterprise economies are characterized by specialization, organization and technology. Intellectual property-oriented economies are characterized by specialization, organization and technology, while the knowledge economy develops through technology and information.