Simple Vs Complex Economic Concepts

An economy is basically an area of interaction, production, distribution, and consumption of goods and services, by various independent agents. In simple terms, it is defined as ‘a socio-economic domain that reflect the practices, discourses, material exchanges and the relationships associated with production, use and management of physical resources.’ Economists have divided the area into different categories, like economic structure, economy and money, accounting and other micro-organisms, political economy and international trade. The complex interplay of all these factors is referred to as the economic environment. Besides, there are also the political and the technological aspects involved.


A simple economy, on the other hand, refers to the production of sufficient quantities of primary goods, such as food, fuel, raw materials and construction material, which can be traded and exchanged internationally. In this type of economy, households, families and groups of people adjust their production and consumption according to the prices and the level of income. As an example, in such economy, there is no room for speculation, since production and consumption are always based on the prices set by the market.

In a complex economy, there is a real estate market and complex financial system. There are the government institutions, banks, currency market and central banks, which provide monetary funds. The central banks usually control the foreign exchange rate, interest rates, short-term interest rates and supply of securities. This type of economy generates employment through various industries, which provides for the employment of persons, both permanent and temporary. As far as the definition of economy is concerned, it basically refers to the interaction of the different economic systems, producing and providing for the needs of the population.