We all encounter words like economics and the economy, in our day to day life. But there are only a few people who can actually define and differentiate these two. Basically, economics is the study of an economy, i.e. its structure, condition, working, performance, issues, remedies, etc. It includes the analysis of the different types of the economic system, economic decisions and its implementation by various economic units, such as individual, family, institutions, government, etc.
On the other hand, an economy indicates a region, a particular area or country, concerning production, distribution, consumption, and exchange of goods and services, and supply of money. Let’s take a look at the article given below to understand the difference between economics and the economy.
Content: Economics Vs Economy
|Basis for Comparison||Economics||Economy|
|Meaning||Economics is the science and art of decison making, regarding the use of scarce resources, under the conditions of scarcity, to attain maximum satisfaction.||When a country or a geographical region is defined in the context of its economic activities, it is known as economy or economic system.|
|What is it?||Theory and Principle||Practical Application of Economics|
|Determines||How human beings make decisions when there is scarcity of resources?||How resources are allocated among different members of society?|
|Focuses on||The way in which economic agents behave and interact and the way in which economies work.||The way in which country's economic affairs are organized and conducted.|
Definition of Economics
Economics is an organized body of knowledge which studies the behaviour and activities of an individual, firm or nation which are related to maximize the satisfaction of wants or advance the welfare and economic growth, by optimum production, distribution, consumption and exchange of scarce resources, that have alternative uses.
In finer terms, economics takes into account how choice is made by individuals, families, firms, governments and nations, concerning the allocation of limited resources, to fulfil their unending wants, in such a way that maximum satisfaction can be derived. It aims at solving the basic issue of scarcity of resources when the human wants are unlimited and there are alternative uses of the resources. There are two branches of economics:
- Micro Economics: The arm of economics which studies the behaviour and actions of individual economic agents, such as a person, a household, a firm, or an industry. In short, it studies small parts of the economy.
- Macro Economics: The arm of economics in which broad issues of the economy are studied, such as economic growth, unemployment, trade balance, poverty, the standard of living, inflation, etc. It studies the economy as a whole.
Definition of Economy
The economy can be understood as the aggregate of all the arrangements for production, distribution, purchase, consumption and exchange of goods and services, and employment in a society or nation. In finer terms, economy refers to the summation of all the methods that helps the individuals or governments in making an economic choice. Economics helps the nations in solving the major problems of the economy, which are:
- What to produce?
- How to produce?
- How much to produce?
- When to produce?
- For whom to produce?
- What provisions are to be made by the relevant authority for economic growth?
There are three types of economies found in the world:
- Capitalist Economy: In a capitalist economy (or free-market economy), all the factors of productions are under the ownership and control of private individuals for profit. Basically, private property is the foundation and profit motive is the driver of the capitalist economy.
- Socialist Economy: In a socialist economy, the factors of production are collectively owned and controlled by the community, indicated by the State. In this economy, there is a central planning authority which decides the allocation of resources among the members of the community.
- Mixed Economy: Mixed Economy is a combination of a capitalist and socialist economy, wherein both markets and government decide the allocation of resources. In a mixed economy, a system is found that contains the features of both a controlled economy and market economy, and so there is a co-existence of the public and private sectors in this type of economy.
Key Differences Between Economics and Economy
The points given below are substantial with respect to the difference between economics and the economy:
- Economics can be defined as the social science which stresses on the behaviour, interactions and decisions of economic agents regarding the satisfaction of their wants when the resources are limited. On the other hand, Economy refers to an organized system, which encompasses production, distribution, consumption and exchange of goods and services and level of employment in a nation or region.
- Economics is theoretical, as it contains theories, models and principles. As against, the principles and theories of the economics are practically applied in economy.
- Economics analyses the way in which individuals, families, organizations and nations make choices in the face of scarcity of resources. Conversely, the economy tells you about the way resources are allocated among different members of society.
- The primary focus of economics is on how individuals, families, firms and nations, behave and interact, how they make choices, how society uses its limited resources, and how economies work. On the contrary, the main focus of the economy is on how the company’s economic affairs are organized and conducted.
To sum up, we can say that Economics is a subject concerned with the optimization of available resources, in an efficient manner. On the other hand, Economy denotes the economic condition, status and activities of a geographical area or country.
Fonsia Donzo says
Clear explanation and easily understandable
Great explanations for a beginner like myself. Thank you very much!
Olorunfemi Marvellous says