What Is Economy and Part Of Economy
Economy refers to such an institutional system, which fulfills the material needs of the society as well as fulfills all its economic activities. In other sense,meeting the material needs of the society is the central objective of any economy and it is also the central parameter of failure or success of any economy.
The economy can be understood by dividing it into two parts from the point of view of structure
1. Microeconomics
2. Macroeconomics
Micro Economics:- Microeconomics believes that the economy should operate according to the laws of the market. This economics assesses the personal benefit of the individual. It assumes that all economic activities are governed by the interests of private agents. Therefore, in the study of economy, the behavior of private agents should be studied. This private agent can be an individual as well as a firm.The pioneer of microeconomics was Adam Smith. Adam Smith believed that if the personal benefit of the individual is assured,then the benefit of the whole society will be ensured because there is no conflict between the interests of the individual and the society. He believed that all the people would get employment and all the firms would get the full potential of production,therefore the market should operate according to its own rules,there should be no external aggression or interference in it.
Macro Economics:- The father of macroeconomics was the British economist John Maynard Keynes. He wrote a book called 'The General Theory of Employment in Interest of Money' in 1936, from where it is considered the beginning of macroeconomics. Macroeconomics looks at development from the point of view of society. Not from the point of view of the individual, he talks of state control of the economy in the collective interest. According to this, the state should play an active part in the operation of various components of the economy.
