Economy is a system of trade and exchange that determines how scarce resources are distributed amongst individuals within a society. Economic growth is the result of group members gaining skills and specializing their work, which allows them to produce more than they could alone. The division and specialization of labor also reduces the amount of money needed to purchase goods. People usually classify economies based on how much government control is involved, with one end of the spectrum being free-market economies and the other being command economies. The modern concept of the economy was developed by philosopher Adam Smith in his 1776 masterpiece, The Wealth of Nations.
Economics has many different aspects, and the word itself may be used to describe anything that involves selling or making products. However, when referring to the global economic system, it is typically meant to refer to the overall production of products and services. This includes both market-driven and command economies as well as many types of middle-ground systems such as mercantilism.
Market-driven economies are primarily driven by supply and demand, with the price of goods being the primary trigger to growth. This type of market is very competitive, leading to some monopolies by businesses, and this is why governments often need to interfere to prevent consumer exploitation.
In addition to the role of regulating and providing public goods, services and redistribution of wealth, government’s also play a vital role in the economy by collecting taxes. The taxes collected are usually used for a nation’s welfare and development.