What is an economy?
For the factors of production to be utilised to their fullest potential, they need to be organised into an economy.
An economy consists of various markets, which are essentially a gathering of buyers and sellers. Economic markets are mechanisms used to allocate scarce resources in an economy. A country’s economy is a macroeconomic topic, but an economic market is a microeconomic mechanism that explains how the economy works.
An economy consists of consumers who buy products and services, businesses who employ consumers and make goods, and the government at various level who both buy products, employ labour and levy taxes. Their collective interactions create a simplified economy.
Watch the video above where Nick explains what a simple economy looks like.
Your task
Where do you and your employer fit into the economy outlined in the video?
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