DEFINITION of 'Microeconomics'

The branch of economics that analyzes the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households. It is concerned with the interaction between individual buyers and sellers and the factors that influence the choices made by buyers and sellers. In particular, microeconomics focuses on patterns of supply and demand and the determination of price and output in individual markets (e.g. coffee industry).

DEFINITION of 'Macroeconomics'

The field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena such as changes in unemployment, national income, rate of growth, gross domestic product, inflation and price levels.

Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic statements do not have to be correct, but they must be able to be tested and proved or disproved. Normative economic statements are opinion based, so they cannot be proved or disproved.

Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic statements do not have to be correct, but they must be able to be tested and proved or disproved. Normative economic statements are opinion based, so they cannot be proved or disproved.

Economics is the science that concerns itself with economies, from how societies produce goods and services, to how they consume them. It has influenced world finance at many important junctions throughout history and is a vital part of our everyday lives. The assumptions that guide the study of economics, have changed dramatically throughout history. In this article, we'll look at the history of how economic thought has changed over

time, and the major participants in its development.

The Father of Economics

Adam Smith is widely credited for creating the field of economics, however, he was inspired by French writers, who shared his hatred of mercantilism. In fact, the first methodical study of how economies work, was undertaken by these French physiocrats. Smith took many of their ideas and expanded them into a thesis about how economies should work, as opposed to how they do work.

Smith believed that competition was self-regulating and that governments should take no part in business through tariffs, taxes or any other means, unless it was to protect free-market competition. Many economic theories today are, at least in part, a reaction to Smith's pivotal work in the field.

The Dismal Science of Marx and Malthus

Karl Marx and Thomas Malthus had decidedly poor reactions to Smith's treatise. Malthus predicted that growing populations would outstrip the food supply. He was proven wrong, however, because he didn't foresee technological innovations that would allow production to keep pace with a growing population. Nonetheless, his work shifted the focus of economics to the scarcity of things, versus the demand for them.

Keynesian Economics

John Maynard Keynes' mixed economy was a response to charges levied by Marx, long ago, that capitalist societies aren't self-correcting. Marx saw this as a fatal flaw, whereas Keynes saw this as a chance for government to justify its existence. Keynesian economics is the code of action that the Federal Reserve follows, to keep the economy running smoothly. (To learn about how the Fed does this, see The Federal Reserve.)

Resources required for generation of goods or services, generally classified into four major groups:

1. Land(including allnatural resources),2. Labor(including allhuman resources),3. Capital(including all man-made resources),

and4. Enterprise(which brings all the previous

resources together forproduction).

entrepreneur

noun, plural entrepreneurs  [ahn-truh-pruh-nurz, -noo rz; Frenchahn-truh-pruh-nœr] 1.a person who organizes and manages any enterprise, especially abusiness, usually with considerable initiative and risk.2.an employer of productive labor; contractor.verb (used with object)3.to deal with or initiate as an entrepreneur.verb (used without object)4.to act as an entrepreneur.