An economy (from Greek οίκος – "household" and νέμoμαι – "manage") is an area of the production, distribution, or trade, and consumption of goods and services by different agents. Understood in its broadest sense, 'The economy is defined as a social domain that emphasizes the practices, discourses, and material expressions associated with the production, use, and management of resources'. Economic agents can be individuals, businesses, organizations, or governments. Economic transactions occur when two parties agree to the value or price of the transacted good or service, commonly expressed in a certain currency. However, monetary transactions only account for a small part of the economic domain.
Political economy is the study of production and trade and their relations with law, custom and government as well as with the distribution of national income and wealth. Political economy as a discipline originated in moral philosophy in the 18th century and sought to explore the administration of states' wealth, with "political" signifying the Greek word polity and "economy" signifying the Greek word "okonomie" or "household management". The earliest works of political economy are most often attributed to British scholars like Adam Smith, Thomas Malthus and David Ricardo, although the case is sometimes made that the still earlier works of the French physiocrats constitute the true beginnings of the discipline.
It has been said, and perhaps with truth, that the conclusions of Political Economy partake more of the certainty of the stricter sciences than those of most of the other branches of human knowledge.
Thomas Malthus, Principles of Political Economy (Second Edition 1836) Book I, Introduction, p. 1
As there are so many who talk prose without knowing it, or, again, who syllogize without having the least idea what a syllogism is, so economists have long been mathematicians without being aware of the fact.
William Stanley Jevons, The Theory of Political Economy (1871). Preface To The Second Edition, p. 14
The opinions that the price of commodities depends solely on the proportion of supply and demand, or demand to supply, has become almost an axiom in political economy, and has been the source of much error in that science.
David RicardoThe Principles of Political Economy and Taxation (1821) (Third Edition) Chapter XXX, Influence of Demand and Supply, p. 260