We often come across in the books on Economics the words ‘rural economy’, ‘urban economy’, ‘agricultural economy’, ‘industrial economy,’ the ‘developed or advanced economy’, ‘under-developed or backward economy’, ‘a developing economy’, and so on.
Let us clearly understand what we mean by the term ‘economy’. The term ‘economy’ refers to the conditions under which goods are produced in a country and the manner in which the people are gainfully employed. It connotes all the sources of employment and production.
In other words, the form of economy tells us how the people of a country are organised for work and for getting a living. Think of farms, factories, workshops, business establishments, shops, offices, mines, roads, railways, airplanes, etc., in which people work and earn their living. All these organisations and institutions collectively go to form the economy of a country.
According to Prof. Loucks, economy is an organisation for the purpose of satisfying man’s wants from the utilisation of the means of production at his disposal. It involves mutual exchanges between producers and producers on the one hand, and producers and consumers on the other. An economy or economic system may be described as “the co-operation of producers and workers to make goods and services to satisfy the wants of consumers”.—(J. R. Hicks).