ABSTRACT
This chapter presents the most important concepts in economics, including how to approach trade-offs; what markets really are; and the importance of such abstract things as trust and money. It examines the production-possibility frontier and the basic neoclassical model. The chapter discusses the major factors that are important for macroeconomics, including public goods, externalities, transaction costs, market power, questions of information and expectations, and concerns over human needs and equity. More Keynesian-oriented macroeconomists, by contrast, tend to emphasize how real-world markets might differ from the smoothly functioning markets that exist in theory. Real-world markets require an impressive set of associated institutions to work well, they point out. Governments may need to factor in the responses of powerful business groups in making their macroeconomic decisions. Corporations frequently also try to influence government policies directly, through lobbying, campaign contributions, and other methods.
