What Is Economy?

‘Economy’ is everything related to the manufacture and distribution of goods. Goods are items and services that we need or want for a living, such as food, clothes, books, mobile phones, or a haircut. In the ‘free market economy’ everything is about money. Many companies issue shares to get money, with which they buy new machines or new technology, so that they can produce more and better.

Modern assembly lines
Modern assembly lines employ very few workers. Production cost reduces but employees often lose their jobs.

What is a ‘free market economy’?

In the “free market economy’, only the goods that are needed by buyers are supplied by the manufacturers. If the supply is less than the demand, it leads to a price rise. Buyers cannot afford to purchase goods, as a result the demand reduces and prices come down. So, the market regulates itself. In a ‘managed economy’, the state decides the type and amount of goods that will be produced. It also determines the price of goods and the wages of workers. The Soviet Union and the GDR had managed economies earlier.

Did you know that…

There still exist some economies without money? In some countries, there are people who exchange goods and services in ‘barter exchanges’, instead of paying for them with money.

What is a Share?

trading in shares
By trading in shares one can earn a lot of money, and can also lose it.

Stock is the total amount invested in a company. This is divided into shares of specific values. Companies sell these shares to the public to raise money. By selling shares, the company gets money and the buyer gets a share of the assets of the company and can claim a corresponding part of its annual profit. Shares are traded – bought and sold – at a stock exchange.The examples of major stock exchanges include Tokyo Stock Exchange, London Stock Exchange, and Shangai
Stock Exchange.

What is ‘Mafia’?

Today, the term ‘Mafia’ denotes organized groups that earn money by criminal activities such as drug and weapon trading, smuggling, or human trafficking. Even the companies that use unfair or illegal means for their personal profit – such as a dishonestly obtained multimillion construction order – are also known as ‘Mafia’. The original mafia arose about 200 years ago on the Italian island of Sicily and its aim was to create wealth for the family. Some famous mafia bosses, like AI Capone, were imprisoned after a lot of efforts by the police.

Why is insurance important?

Insurance schemes make our life more secure. They protect us when ‘something happens’ to us. For instance, health insurance pays for the medical costs in case of illness, life insurance pays a certain sum of money to the dependents in case of death, and liability insurance pays for damage due to an accident. For this protection, you have to pay a certain amount of money, called premium, to the insurer. The system works because insurance companies get premium from a lot of people but have to pay out only to a few people in case of death, illness, or accidents.

Did you know that…

Insurance companies can insure themselves? They get this done by a special ‘reinsurance company’.

What are services?

Taking coaching classes
Taking coaching classes is a service. The tutor get a fixed hourly wage, which is paid by all his/her students together. Individual tuition, therefore, is very expensive.

Services are non-material goods, i.e., all the things for which one pays, but cannot ‘touch These include, for instance, consultation in a travel agency, a perm in a salon, repair of the washing machine, and the service in a restaurant. Trading was done earlier mainly with goods like groceries and clothes. As people have lost their jobs to machines, most people today do not work in production –manufacture of cars, aircraft, and toys. They prefer to work in the service industries.