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articles about economic issues, you will understand and be able to evaluate the
writer’s argument. When you hear classmates, co-workers, or political candidates
talking about economics, you will be able to distinguish between common sense and
nonsense. You will find new ways of thinking about current events and about
personal and business decisions, as well as current events and politics. The study of
economics does not dictate the answers, but it can illuminate the different choices.
Economics is concerned with the well-being of all people, including those with
jobs and those without jobs, as well as those with high incomes and those with low
incomes. Economics acknowledges that production of useful goods and services can
create problems of environmental pollution. It explores the question of how investing
in education helps to develop workers’ skills. It probes questions like how to tell
when big businesses or big labor unions are operating in a way that benefits society
as a whole and when they are operating in a way that benefits their owners or
members at the expense of others. It looks at how government spending, taxes, and
regulations affect decisions about production and consumption. It should be clear by
now that economics covers a lot of ground. That ground can be divided into two
parts: Microeconomics focuses on the actions of individual agents within the
economy, like households, workers, and businesses; Macroeconomics looks at the
economy as a whole. It focuses on broad issues such as growth of production, the
number of unemployed people, the inflationary increase in prices, government
deficits, and levels of exports and imports. Microeconomics and macroeconomics are
not separate subjects, but rather complementary perspectives on the overall subject of
the economy. To understand why both microeconomic and macroeconomic
perspectives are useful, consider the problem of studying a biological ecosystem like
a lake. One person who sets out to study the lake might focus on specific topics:
certain kinds of algae or plant life; the characteristics of particular fish or snails; or
the trees surrounding the lake. Another person might take an overall view and instead
consider the entire ecosystem of the lake from top to bottom; what eats what, how the
system stays in a rough balance, and what environmental stresses affect this balance.
Both approaches are useful, and both examine the same lake, but the viewpoints are
different. In a similar way, both microeconomics and macroeconomics study the
same economy, but each has a different viewpoint. Whether you are looking at lakes
or economics, the micro and the macro insights should blend with each other. In
studying a lake, the micro insights about particular plants and animals help to
understand the overall food chain, while the macro insights about the overall food
chain help to explain the environment in which individual plants and animals live. In
economics, the micro decisions of individual businesses are influenced by whether
the macroeconomy is healthy; for example, firms will be more likely to hire workers
if the overall economy is growing. In turn, the performance of the macroeconomy
ultimately depends on the microeconomic decisions made by individual households
and businesses.
What determines how households and individuals spend their budgets? What
combination of goods and services will best fit their needs and wants, given the
budget they have to spend? How do people decide whether to work, and if so,
whether to work full time or part time? How do people decide how much to save for
the future, or whether they should borrow to spend beyond their current means?

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