A economy is a place of exchange, production and distribution, and consumption of various goods and services by many agents. In simple terms, it is described as ‘a social community that concentrate on the practices, modes, discourses, and content of exchange of products and services by various agents’. It has become the most important aspect of all economic activity. Economists have tried to describe the economy in many different ways but they all concur on one thing: it is a system in which production is the main activity and money is the medium of exchange.
The distribution of wealth is also important in any economy and this determines the strength or weakness of the economy. In fact, economists argue about the distribution of wealth because they consider that there is not enough good land, enough capital goods, enough trained people for education, enough money in the economy so that poor people can survive. All these things lead to the scarcity of scarce resources. Scarce resources are used up by the productive sector first and then they are distributed amongst the other parts of the economy.
Economists debate about the distribution of wealth, the level of efficiency of the market system, the stability of the economies, the extent of freedom of markets, etc. Many free-market economists are also sceptical about the importance of planning in a economy. They believe that economies are largely controlled by forces of demand and supply. But it does not mean that economies can’t plan, they just have to do it in a coordinate way. In fact, if planned correctly, economies can be very far advanced towards socialism.