When you study basic economic principles,
these principles are almost always divided up into those
covering microeconomics versus macroeconomics.
Microeconomics deals with the behavior of individual markets and the businesses,
consumers, investors and workers that make up the economy.
Three major areas of analysis include,
one, how consumer theory helps explain market demand,
how production theory helps explain market supply,
and how market prices are set in equilibrium by the forces of demand and supply; two,
how forms of market structure ranging from
perfect competition and oligopoly to pure monopoly determine
the strategic choices and conduct of businesses even as
they affect the efficiency and performance of markets,
and the third focus of microeconomics is this: why
market failures ranging from pollution externalities and
imperfect information to the public goods problem
may require government intervention into the free market.
In contrast, the word macro means big or large,
and macroeconomics deals with
a much larger picture of how national economies and the broader global economy perform.
Key macroeconomic problems range from inflation,
unemployment and slow growth to budget deficits and trade imbalances.
Possible policy solutions range from fiscal,
tax and monetary policies to trade policies and regulatory reforms.
Because of the business focus of this macroeconomics course,
we also are very much interested in how both corporate executives and
investors strategize in a world of continually changing macroeconomic conditions.
A key theme of this course is that business executives
and investors who have a strong command of macroeconomics
will outperform their rivals and peers through
the diligent practice of strategic business cycle management.
Take a few minutes now to study this figure carefully as it is,
in effect, a handy little roadmap for this course.
When you are ready, let's move on to a discussion of one of the key differences between
microeconomics and macroeconomics related to the idea of self-correcting markets.