ABSTRACT
This chapter presents a number of important concepts that are useful in understanding how the economy works and in thinking about how we might make it work better as citizens and through government action. It starts by describing different ways to investigate economic phenomena. This is followed by an examination of two models that offer different approaches to defining and understanding the economy. The chapter provides an introduction to the nature of markets. An empiricist argues that knowledge primarily comes to us from the five senses (seeing, hearing, touching, tasting, and smelling). In economics, empirical investigation is mainly about making observations that are then represented in words or images, as well as collecting numerical data.
