Simple and Complex economy
An economy is a system that provides people with goods and services and directly or indirectly satisfies their wants. In this article, you are going to read about Complex Economy.
On the basis of their nature, economies are classified into the following categories:
- Simple or complex economy
- Closed or open economy
- Planned or unplanned economy
- Agricultural or industrial economy
What is Simple Economy?
A simple economy refers to a system wherein people produce simple goods in limited numbers/quantities for the satisfaction of their wants. The barter system of exchange prevails in this economy. These types of economies existed in Indian villages in olden times.
What is Complex Economy?
A complex economy refers to a system wherein several kinds of goods are produced in large quantities. The process of production in these economies is highly complex and advanced. Money is widely used as a medium of exchange. This economy came into existence in the Post-Industrial Revolution period.
Difference between Simple and Complex Economy
| Simple Economy | Complex Economy |
|---|---|
| Only simple goods are produced to satisfy basic human wants. | A variety of goods are produced and in large quantities. |
| Techniques used in the production process are simple. | Techniques used in the production are complex and highly advanced. |
| A barter system is used for buying and selling goods. | Money is used as a medium of exchange for goods and services. |
| Wants are limited as people live in isolation and are self-sufficient. | Goods are produced in large quantities not only for self-use but also to be supplied and sold to distant markets. |
| It is a self-reliant economy. | It is a modern economy. |
Economic Growth and Economic Development
Economic growth is an increase in the national income or per capita output over a period. It is a sign of quantitative growth in the country. On the other hand, economic development is a process where the real per capita income of a country increases over a period with a decrease in poverty ratio, unemployment, and income inequality.
Economic Problem
The demand for goods and services arises from human wants. No individual in the whole world can fulfill all his/her wants. Wants are unlimited and means are limited. Thus, this scarcity of means in relation to wants brings forth the economic problem of how many resources should be used in satisfying different wants. In this way, one has to choose a set of wants from among unlimited wants which are to be satisfied with limited resources. Scarcity means a situation where only a limited amount of goods can be produced because of the existence of a limited amount of resources.
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