You probably are very familiar with the cliché `The Economy`. Day in day out, this term is used in reference to many different things and under different circumstances. Most often though and mainly in our African or to be more specific our Kenyan context, the term is never accompanied with good news. It is usually associated with the negative events in the society like high fuel costs, high interest rates, unemployment, and inflation e.t.c.
Well, to a greater degree, all the above negative situations are part and parcel of what `the economy` is all about. However, `the economy` is not limited to only negative things.
`The Economy` generally refers to all the activities involved in the production, distribution and consumption of goods and services within a given geographic region. This region could be a country, continent, a section of a continent or even the whole world. Therefore, anything and any activity involving production and distribution of goods and services within that given region constitutes `The Economy`.
To get a better understanding of `the economy`, you need to understand first what economics is all about. Economics simply means the study of how the forces of demand and supply facilitate the allocation of scarce resources amongst the many and unlimited needs and wants of humanity. In this study, economics is divided into two major sections:
- Microeconomics – This deals with the behavior of the individual consumer, the firm and the role of the government in the production and distribution of goods and services.
- Macroeconomics – This deals with economics from a broader perspective and looks into things like inflation, unemployment, industrial production and the role of the government in all these.
With the understanding of what economics is all about, then getting deeper into knowing and understanding the various forms of economy will be easier and digestible. These forms are:
- Market Based Economy – this is where goods and services are freely produced and distributed according to the demand and supply of the participants of that particular economy (economic agents).
- Capitalism – this is where capital and land are mainly controlled and owned by the private sector as opposed to the government. The government’s only role is that of policy making and regulation.
- Socialism – this where capital and land are owned and controlled by the central government. Production and distribution of goods and services is centralized for the common good of all the citizens.
- Mixed economy – this is an economy with characteristics of both capitalism and socialism i.e production and distribution of resources is driven by the forces of demand and supply, but some activities are centralized at the government.
For an informed analysis of `the economy` and how it relates to and affects your life as an individual, keep it here at FieCon-sult…much more in-depth analysis of both our local and international economies coming…