An economy is a field of interaction, production, distribution and exchange, not only of goods and services, by various agents. In broad terms, it is understood ‘as a political domain that involve the practices, discourses and material exchanges related to the production, utilization, distribution, consumption and saving of goods and services’. In other words, economy is the totality of human action in relation to the environment and it is considered as the mechanism by which value is created and value is determined. The process of economy has many interrelations and most importantly, it generates a demand for a market and it also determines the size and rate of economic activity.
Economists have attempted to describe economy as the process through which value is created and households decide how to use it in their everyday lives. For instance, the process of economic exchange is the core of economics; it refers to the process of creating and distributing value within an economic system. Besides, exchange involves production and distribution of goods or services, the transfer of cash between agents, and the allocation of available resources. Household management is one of the important parts of economy because it affects the overall efficiency and determines the level of production and employment. Household management includes planning, forecasting, savings and investment, budgeting, and repayment of loans.
The concepts of economics are used to examine how people and institutions interact to produce and provide goods and services. Households determine the overall efficiency of economy by making decisions concerning production and allocation of available resources. The production of available goods and services, in turn, affects the consumers who buy them and the level of employment. As you can see, economics helps us to understand how things function. Moreover, a thorough understanding of economy helps individuals and institutions survive in a global economic environment.