In This Chapter
Introducing the areas that are the focus of microeconomics
Understanding the key roles of rational decision-making, competition, and cooperation
Seeing that markets don’t always work
As we’re sure you know, micro as a prefix often indicates something very small, such as a microchip or a microcosm. Micro can also mean something that isn’t small itself but that is used to examine small things, such as a microscope.
Microeconomics is the area of economics that studies the decisions of individual consumers and producers and how they come together to make markets. It explores how people decide to do what they do and what happens when interests conflict. It also considers how people can improve markets through their actions, the effects of laws, and other outside interventions. So despite the name, microeconomics is in fact a huge subject.
Traditionally, people contrasted microeconomics with macroeconomics — the study of national economies and weighty topics such as growth, unemployment, inflation, national debt, and investments. But over the years, the scope of microeconomics has grown; today economists analyze topics ...