Economy is the means for supplying man’s most pressing wants by careful husbandry in the employment of resources, labor, energy, ingenuity and productive devices.
A basic economy is one that relies on the laws of supply and demand to determine prices and total production. As consumer demand for a particular product rises, producers respond by increasing production. This constant tug-of-war between supply and demand naturally balances itself as prices in one sector rise or fall, directing labor and money to where they are needed.
In the modern world, almost all countries operate in what is called a mixed economy. That is, they combine market pricing and production with a degree of government intervention.
Most people in a country participate in the economy by working for wages. In turn, those workers use the money they earn to purchase goods and services for themselves. The overall state of the economy is commonly measured by indicators such as gross domestic product (GDP), inflation, and growth.
Another way that people contribute to the economy is by investing in physical capital, such as buildings, machines or tools. Adding this type of investment to the economy increases productivity, meaning that workers can produce more goods and services in the same amount of time. This in turn, increases the GDP of a nation. In addition, governments play a critical role in the economy by regulating and providing public goods and services as well as collecting taxes.