Economy is a social domain that encompasses human practices, discourses, and material expressions related to the production, distribution and trade of goods and services. An economy’s characteristics are influenced by its culture, values, education, technological evolution, history, social organization, political structure, legal systems, and natural resources among others.
Economic activity is triggered by production which uses raw materials, labor and capital. It is based on the idea that scarcity exists, and it aims to address this by using a division of labor. Instead of one person attempting to produce all the necessary goods and services, people are encouraged to learn a set of skills which they can sell in order to buy other products. This creates an incentive to innovate and produce better and cheaper goods, as well as to improve existing ones.
A healthy economy has the potential to reduce poverty, unemployment and inequality. Consistent growth encourages employment, cuts welfare benefits linked to unemployment and poverty, and increases tax revenue which can be invested into infrastructure such as road, rail and air routes, ports, hospitals and educational institutions.
The economy also has the ability to respond to shocks. For example, if the price of oil drops, so does demand and production in the sector affected by the drop. This creates a balance and the economy automatically adjusts to its new state. This is what makes it resilient.
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