Economy and its Types
The term economy has been defined by A. J. Brown as, “A system by which people earn their living.” J. R. Hicks defined as, “An economy is a cooperation of producers and workers to make goods and services that satisfy the wants of the consumers.”
In short, an economy is referred to any system or area where economic activities are carried out. Each economy has its own character. Accordingly, the functions or activities also vary. The functioning of an economy by its activities is explained in flow chart 1.
In an economy, the fundamental economic activities are production and consumption. These two activities are supported by several other activities. The ultimate aim of these activities is to achieve growth. The ‘exchange activity’ supports the production and consumption activities. These activities are influenced by several economic and non- economic activities. The major economic activities include transportation, banking, advertising, planning, government policy and others. The major non- economic activities are environment, health, education, entertainment, governance, regulations etc. In addition to these supporting activities, external activities from other economies such as import, export, international relations, emigration, immigration, foreign investment, foreign exchange earnings, etc. also influence the entire functioning of the economy.
Economies can be classified into different types based on the
1. Status of Development: Developed, underdeveloped, undeveloped and developing economies.
2. System of Activities: Capitalistic, Socialistic and Mixed Economies.
3. Scale of Activities: Small and Large Economies.
4. Nature of Functioning: Static and Dynamic Economies.
5. Nature of Operation: Closed and Open Economies.
6. Nature of Advancement: Traditional and Modern Economies.
7. Level of National Income: Low Income, Middle Income and High Income Economies.