Economy Functions: Production, Consumption, Distribution

Every economy has its purpose and role in society. It is necessary to comprehend a true worth of economy to use its benefits and succeed. As a rule, there are four main functions of the economy: the identification of what should be produced, the analysis of production amount, the description of potential users, and the evaluation of the distribution resources.

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What should be produced? It is the economy’s first function, to understand what is expected, available, and possible and introduce a thing for production in regards to these three factors (Study Lecture Notes, 2012). Another important function of the economy is the necessity to realize how much should be produced. The most economical way should be chosen for the production process in order to promote low costs and high profits.

The attention to the available technologies should be also paid to illuminate all possible shortages of the process and underline the most crucial benefits and outcomes. The next function is the identification of the final audience for the products. To complete this function on a high level, the needs and expectations of potential users of products/services should be analyzed.

This is why it is important to realize for whom something is produced and why this kind of audience may need a product. Finally, the distribution of resources has to be discussed. People and resources are usually distributed by means of a variety of factors such as occupations, economic needs, age, abilities, etc. A proper distribution of resources is a vital part of the economy that explains how to promote investments in different sectors (Study Lecture Notes, 2012).

In general, all these functions have to be considered to introduce a good example of how the economy should work and impact different processes within the same society. Any economic system has to be based on these four functions to be properly completed on its own stage.


Functions of economic system, scarcity and choice.” (2012). Study Lecture Notes.

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