An economy consists of the economic system in a certain region, comprising the production, distribution or trade, and consumption of goods

and services in that region or country. An economy is the total aggregate sum of all transactions of value between two agents, such as one individual to one other individual, or between groups of individual activity, such as in organizations to other organizations, and between one nation and another nation. Transactions only occur when both parties agree to the value, commonly expressed in some currency, or price. Then and only then is the sale of good or service acted on in the transaction. An economy represents the diverse activity of all agents engaged in the production of valuable goods and services for other agents in the economy. In the past, economic activity was theorized to be bounded by natural resources, labor, and capital. This view ignores the value of technology (automation, accelerator of process, reduction of cost functions), and creativity (new products, services, processes, new markets, expands markets, diversification of markets, niche markets, increases revenue functions), especially that which produces intellectual property. A given economy is the result of a set of processes that involves its culture, values, education, technological evolution, history, social organization, political structure and legal systems, as well as its geography, natural resource endowment, and ecology, as main factors. These factors give context, content, and set the conditions and parameters in which an economy functions. Some cultures create more productive economies and function better than others, creating higher value, or GDP. A market-based economy is where goods and services are produced without obstruction or interference, and exchanged according to demand and supply between participants (economic agents) by barter or a medium of exchange with a credit or debit value accepted within the network, such as a unit of currency and at some free market or market clearing price. Capital and labor can move freely to any area of emerging shortage, signaled by rising price, and thus dynamically and automatically relieve any such threat. Market based economies require transparency on information, such as true prices, to work, and may include various kinds of immaterial production, such as affective labor that describes work carried out that is intended to produce or modify emotional experiences in people, but does not have a tangible, physical product as a result. A command-based economy is where a central political agent commands what is produced and how it is sold and distributed. Shortages are common problems with a command-based economy, as there is no mechanism to manage the information (prices) about the systems natural supply and demand dynamics.

IMPORTANCE OF ECONOMICS
Economics deals with the laws and principles which govern the functioning of an economy and its various parts. An economy exists because of two basic facts. Firstly, human wants for goods and services are unlimited and secondly, productive resources with which to produce goods and services are scarce. Therefore, an economy has to decide how to use its scarce resources to obtain the maximum possible satisfaction of the members of the society. It is this basic problem of scarcity which gives rise to many of the economic problems. There has been a lot of controversy among economist about the true content of economic theory or its subjects matter. The subject matter and scope of economics has been variously defined. Each definition is incomplete inadequate and because of various conflicting definition, some confusion has been created about the nature and scope of economics. The subject matter of economics has been divided into two parts: microeconomics and macroeconomics. In Microeconomics we study the economic behavour of an individual, firm or industry in the national economy.It is thus a study of a particular unit rather than all the units combined.We mainly study the following in microeconomics: 1) Product pricing 2) Consumer behavior 3) Factor pricing 4) Economic conditions of a section of the people 5) Study of a firm and 6) Location of a industry. In macro economics, we study the economic behavior of the large aggregates such as the overall conditions of the economy such as total production, total consumption, total saving and total investment in it.It includes: 1) National income and output 2) General price level 3) Balance of trade and payments 4) External value of money 5) Saving and investment and

6) Employment and economic growth. The problem of scarcity and choice making can be depicted using the tool of production possibilities curve. The basic economic problems of what, how and for whom to produce can be solved in many ways by an economy. If it gives the whole charge of the economy, to private ownership we get capitalist economy, to public ownership we get socialist economy and jointly to private and public ownership we get mixed economy.