Economy Definitions

1. Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people

2. Economics studies how individuals, firms, government, and other organisatiom within our society make choices and how these choices determine society's use o fits resources

Types of Economies

1. Agrarian Economy
2. Industrial Economy
3. Service Economy

1. Agrarian Economy

An economy is called agrarian if the share of its primary sector is 50 per cent or more in the total output (the GDP) of the economy. At the time of Independence, India was such an economy. But now it shows the typical symptom of a service economy with the primary sector's contribution falling to almost 18 per cent of its total produce, while almost 60 per cent of their population depends on the primary sector for its livelihood. Thus, in monetary terms India is no more an agrarian economy, the dependency ratio makes it so-India being the first such example in the economic history of the world.

2. Industrial Economy

If the secondary sector contributes 50 per cent or more to the total produce value of an economy, it is an industrial economy. Higher the contribution, higher is the level of industrialisation. The western economies who went for early industrialisation earning faster income and developing early known as developed economies. Most of these economies have crossed this phase once the process of industrialisation saturated.

3. Service Economy

An economy whose 50 per cent or more produce value comes from the tertiary sector is known as the service economy. First lot of such economies in the world were the early industrialised economies. The tertiary sector provides livelihood to the largest number of people in such economies. In the last decade (2003-04 to 2012-13), growth has increasingly come from the services sector, 11 whose contribution to overall growth of the economy has been 65 per cent, while that of the industrial and agricultural sectors has been 27 per cent and 8 per cent respectively.
By the end of the 19th century it was a well- established fact, at least in the western world, that industrial activities were a faster way to earn income in comparison to agrarian activities. The Second World War had established the fact for the whole world-and almost every country started their preparation for the process of industrialisation. As country after country successfully industrialised, a pattern of population shift occured from one to another sector of the economy, which was known as the stages o fgrowth of an economy. 12 With the intensification of industrialisation, dependency on the primary sector for livelihood decreased and dependency on the secondary sector increased consistently. Similarly, such economies saw a population shift from the secondary to the tertiary sector-and these were known as the 'post-industrial' societies or the services societies. Almost the whole Euro-America falls under this category-these economies are having over
50 per cent of their total produce value being contributed by their tertiary sector and over half of the population depend on this sector for their livelihood. Many other countries which started the process of industrialisation in the post-war period did show abberations in this shift of the population and the income-India being one among them.