The purpose of the economy. Economy and its role in society

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:40

The great Scottish scientist Adam Smith is considered the founder of such a great science as economics. Today, this great science is one of the most relevant and necessary. Knowledge of various economic processes not only makes life easier for people, but also helps to regularly replenish the budget, teaches you how to earn and save.

What is the economy?

In today's world there is a huge need for economically educated people. The importance of the economy is growing every year. This science is being taught even in schools. In every developed country there are many economic universities that modernize and open progressive faculties almost every year.

What kind of science is this and what is the purpose of economics? Social science that studies the market and the behavior of participants in the process of economic activity, exploring how people dispose of property, how they try to satisfy their unlimited needs, is the economy.

The economy and its goals

Many of earth's resources are inherently limited. Fresh water, food, livestock, fabrics are earthly resources that can be lost. Unlikefrom resources, human needs are unlimited. The purpose of the economy is to balance limited resources with unlimited human needs.

The famous American scientist, psychologist Maslow Abraham Harold believed that all basic human needs can be expressed in a pyramid. The basis of the geometric figure is physiological needs, that is, the human need for food, water, clothing, shelter, and procreation. Current economic issues are based on this pyramid. The top of the figure is the human need for self-expression.

Sectors of the economy

To date, only three sectors of the economy have been identified, which in science are called primary, secondary and tertiary. The first sector combines the goals and objectives of the economy in the study of agriculture, fishing, hunting, and forestry. The second sector is responsible for the construction and manufacturing industries, while the tertiary sector is based on the service sector. Some economists prefer to single out the quaternary sector of the economy, which includes education, banking services, marketing, information technology, but in fact, this is what the tertiary sector is studying.

Forms of the economy

To understand the purpose of the economy for sure, you need to familiarize yourself with the forms of the economy. Children begin to study this important topic in middle school not social studies lessons, and then continue to delve into it in high school and university. There are four forms of this social science in total.

Market economy

Market economyis based on free entrepreneurial activity, contractual relations, and a variety of forms of ownership. The state in this case has only an indirect influence on the economy. The characteristic features of this form are free competition, independence and autonomy of the entrepreneur, the ability to choose a supplier, focus on the buyer. The main purpose of the economy in this case is to maintain a connection between the buyer and the entrepreneur.

Traditional economy

The traditional economy is still not outdated, because there are still underdeveloped countries. Customs play a major role in this economic form. Agriculture, manual labor, such primitive technologies (the use of a plow, hoe, plow) are characteristic features of this system. Primitive society was built on a hierarchy and traditional economy, but even today some African, Asian and South American countries still retain this form. At its core, the traditional form is the very first manifestation of economic science.

Administrative-command economy

The administrative-command economy or planned economy existed in the USSR, but is still relevant in North Korea, as well as in Cuba. All material resources are in state, public ownership, the state fully controls the economy and its development. State bodies in the administrative-command economy single-handedly plan the release of products, as well as regulate prices for it. The huge advantage of this economic formis a small social stratification.

Mixed economy

Mixed economy depends on both entrepreneurs and the state. If the administrative-command form includes only state property, then private property is also present in a mixed form. The goal of a mixed economy is the right balance. State property most often includes kindergartens, transport, libraries, schools, universities, hospitals, roads, legal services, law enforcement agencies, and so on. People can freely engage in entrepreneurial activities. Businessmen independently manage their property, make decisions on the production of products, hire and fire workers, and train employees. The government is funded by the people who pay taxes.

Economic growth

The economic growth of a country largely determines the economy and its role in society. Economic growth allows each state to produce more goods, services and benefits. The more goods a country produces, and the greater the demand for them, the more profit this state will receive. Economic growth must be sustainable, but by no means rush.

The expected result of economic growth is a significant improvement in the quality of life of the population. But unfortunately, it is incredibly difficult to achieve this, as there are fewer and fewer competent economists. There are several factors that can raise a country's standard of living.

One of the most important factors is the progress of technology and science. Thanks to new mechanisms, technology, the Internet, labor productivity and working capacity have increased millions of times. Unique, modern, high-quality product is in demand in the sales market.

Another factor in economic growth is the labor force. If the employee does not have a higher education, is lazy, inexperienced, and does not know how to make decisions, then the company will not be successful. Human capital is incredibly highly valued in today's society. Education in a higher educational institution, work experience, knowledge of foreign languages, personal qualities of a person play a huge role in hiring. The economy and its role in the life of society is incredibly high, which is why it is so important to listen to the advice of experienced scientists. Human capital allows an employee to earn additional income. This term was introduced in the 20th century in economics.