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What is Digital Economy? Its Merits and Demerits.

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  • Saturday, 22 Oct, 2022
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What is Digital Economy

The phrase "digital economy" is used to refer to any and all economic activity that takes place through the Internet. The term "Internet economy" (or "Web economy") also applies. The conventional economy and the digital economy are converging due to the rise of technology and the spread of globalisation. We should investigate the meaning of "digital economy" in more depth.

What is Digital Economy?

The term "digital economy" refers to a kind of economy in which digital and computational technology play a central role. All commercial, economic, social, cultural, and other endeavours made possible by means of the Internet and other forms of electronic communication fall within its broad purview.

The author, Don Tapscott, originally used the phrase in his 1995 book, "The Digital Economy: Promise and Peril in the Age of Networked Intelligence."

The economy may be broken down into its three primary parts:

  • e-business
  • e-business infrastructure
  • e-commerce

The previous 15 years have seen the exponential development of digital platforms and their impact on our daily lives. These days, customers are easily swayed by the content they see on social media platforms like Facebook, Twitter, and Instagram, as well as other similarly popular websites (youtube etc).

This economy, therefore, is a means of making use of that possibility. In today's world, technology permeates every facet of a person's existence, from medical treatment to education to banking to leisure activities.

Merits of Digital Economy

Because of the expansion of the digital economy, several novel approaches and business models have emerged. Digital corporations dominate the Fortune 500, with Google, Apple, Microsoft, and Amazon at the top of the list. Let's take a look at some of the digital economy's greatest advantages.

1. Promotes Use of the Internet

Most of what you do on a daily basis can be done online these days. The United States has been at the forefront of a technological revolution and internet expansion that has now gone global. As a result, spending on hardware, technical development, software, services, digital communication, etc., has skyrocketed. In light of the current state of the economy, it is safe to say that e-commerce websites will remain a fixture of the future.

2. Rise in E-Commerce

Successful companies over the last decade have been those who have embraced Internet commerce and adapted to the changing nature of the marketplace. E-commerce has been catalysed by the rise of the digital economy. The advent of the digital economy has simplified not just direct sales but also procurement, circulation, promotion, production, and retailing.

3. Digital Goods and Services

Movies on VHS and compact discs or vinyl are now obsolete. Our society has progressed to the point that we can purchase these products online. Products in their physical form are no longer required. Banking, insurance, and similar services follow the same pattern. If you can complete all your banking needs online, you can save yourself a trip to the bank. Therefore, in this digital economy, several products and services have gone fully digital.

4. Transparency

In the digital economy, the vast majority of purchases and associated payments are made online. Use of cash is decreasing. This contributes to a more open and honest economy by discouraging the use of illicit funds. In fact, the government actively encouraged internet purchasing throughout the demonetisation process.

Demerits of Digital Economy

1. Loss in Employment

The more we rely on machines, the less we need people. Many employment might be lost as the digital economy develops. Automation means fewer people are needed to complete tasks. Consider the phenomenon of internet banking as an example.

2. Lack of Experts

The digital economy can't function without intricate systems and tools. Experts and skilled individuals are needed for both the construction and maintenance of the platforms. The availability of these is limited, particularly in more remote or rural places.

3. Heavy Investment

The success of the digital economy depends on the reliability of our nation's physical structures, the Internet, our mobile networks, and our means of communication. This whole procedure takes a lot of time and money. Improving our nation's infrastructure and communications network is a time-consuming and expensive endeavour.


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