Economics is the study of how goods are produced, distributed and consumed. Economics is called the science of scarcity, as the resources available for the production of goods and limited while the human needs are almost unlimited. Here comes the economics, which tells how to utilise the available resources to satiate human wants.
We usually come across words like communist, socialist and capitalists. These words tell us that who performs the function of production and distribution of goods, whether it is government or it the market. Let’s take a brief review of these terms:
When the production as well the distribution of goods is in the control of the government is called a socialist economy. The former soviet union was a perfect example of this. Here the labour was not controlled by the government.
In addition to being socialist, when the labour is also under the complete control of the government, then that type of economy is called the communist. China was the perfect example of a communist economy.
When the production, as well as the distribution of goods, is under the control of market forces as per the demand and supply, that type of economy is called a capitalist economy. The former USA and western Europe were examples of a capitalist economy.