What it is:
In its broadest sense, the economy is the organized system of human activity involved in the production, consumption, exchange, and distribution of goods and services.
How it works/Example:
Derived from the Greek word oikonomos, meaning "one who manages a household," economy was not used in the modern sense of the economic system of a country or area until the nineteenth and twentieth centuries.
Economy also refers to the way in which resources, especially those in shortage, are managed in a competent and appropriate manner.
For example, the Industrial Revolution of the nineteenth century can probably be considered as the first time in history that goods and services were mass produced for wider consumption.
Why it matters:
Economy is important not only because of its implications for human production and activity, but also because it has engendered one of the most studied of all disciplines: economics.