The economy is a complex system of interrelated production activities. It also encompasses distribution and consumption. This system can include both national and local economies.
The market is an area of free trade in goods and services. It is governed by laws and regulations. These can be applied by governments, companies, and individuals.
The economy can be big or small. It can represent a nation, a state, a region, a city, or even a single industry. Economic activity is driven by capital, labor, and natural resources. Some modern consumer societies also include a growing role of technology and finance.
The economy is a socially organized and regulated system that allocates resources. People spend money in different ways depending on local and global events. If people have more money, they might purchase extra items or set aside savings. When they have less money, they might spend less.
Economies can be a source of conflict. For instance, an increase in output can cause pollution, environmental damage, or reduced leisure time. In addition, it can increase the gap between rich and poor.
An economy can be in a period of growth, recession, or boom. A recession is generally defined as two consecutive quarters of output declines.
The economy can also represent a country, region, or even a family. Each economy is unique, but each is formed by actions of the participants.
There are many theories about the economy. Adam Smith, the first economist in modern times, is known for his concept of competition. He was influenced by the ideas of mercantilism and physiocracy.