ABSTRACT
This chapter introduces some of the key terms and concepts used in both microeconomics and macroeconomics, and how these are analysed by economists. The focus of microeconomics is on studying the economic behaviour of individual economic agents, and how this shapes decision-making. Most microeconomics textbooks begin by analysing demand and supply, albeit in varying levels of detail. Macroeconomics studies the economy at the aggregate level, looking at the relationships between economic variables. It is also possible to view these components of gross domestic product (GDP) as being the components of aggregate demand, and this in turn can be seen as a starting point for the approach to macroeconomics that was initiated by John Maynard Keynes. Policies at the microeconomic level are those that are used to affect individual markets. Policies that are intended to affect the whole economy rather than particular markets are aimed either at aggregate demand or at aggregate supply.
