Economy: What It Is, Types of Economies, Economic Indicators

investopedia.com:

An economy is a complex system of interrelated production, consumption, and exchange activities that ultimately determines how resources are allocated among all the participants. The production, consumption, and distribution of goods and services combine to fulfill the needs of those living and operating within the economy.

An economy may represent a nation, a region, a single industry, or even a family.

An economy encompasses all of the activities related to the production, consumption, and trade of goods and services in an entity, whether the entity is a nation or a small town.

No two economies are identical. Each is formed according to its own resources, culture, laws, history, and geography. Each evolves according to the choices and actions of the participants.

These decisions are made through some combination of market transactions and collective or hierarchical decision-making.

Capitalism requires a market-based economy. Communism requires a command-based economy.

In the modern world, few nations are purely market-based or purely command-based. But most lean toward one or the other of these models.

Market-based or «free market» economies allow people and businesses to freely exchange goods and services according to supply and demand.

The United States is mostly a market economy. Producers determine what’s sold and produced, and what prices to charge. If they expect to succeed, they will produce what consumers want and charge what consumers are willing to pay.  

Through these decisions, the laws of supply and demand determine prices and total production. If consumer demand for a specific product increases, production tends to increase to satisfy the demand. The increased demand causes prices to rise until consumers