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DEFINITION of 'Microeconomics'

The Father of Economics

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).

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.

DEFINITION of 'Macroeconomics'

Smith believed that competition was selfregulating 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 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 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 selfcorrecting. 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),
and
4. Enterprise(which brings all the previous
resources together forproduction).

a person who organizes and manages any


enterprise, especially abusiness, usually w
ith considerable initiative and risk.
2.
an employer of productive labor; contracto
r.

verb (used with object)


entrepreneur

noun, plural entrepreneurs

[ahn-truh-pruh-nurz, -noo rz; Frenchahntruh-pruh-nr]


1.

3.
to deal with or initiate as an entrepreneur.

verb (used without object)


4.
to act as an entrepreneur.