What is the economy?
It’s a word you can’t avoid. But when put on the spot, many people struggle to say what it means. So where to start?
Economists say economics is the study of scarcity. That’s because resources, such as workers, land and raw materials, are limited - while the demand for them is infinite. Basically, we always want more.
So the textbook answer is an economy is a system for distributing scarce resources. And when we talk about ‘the’ economy, we usually mean the UK’s economy.
In some countries, the government chooses what to produce, how much and for whom. In others, it’s determined by what people want to buy, and how much businesses can provide – supply and demand.