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What is microeconomics? Microeconomics studies how individuals and businesses make decisions in interact in markets. It focuses on small parts of the economy, such as one person, one family or one company. Microeconomics helps us understand. Supply and demand. Supply is the amount of goods and services sellers offer. Demand is the amount of goods and services consumers want to buy. Supply and demand help determine prices. Price determination. Prices change when supply or demand changes. High demand usually leads to higher prices. Low demand usually leads to lower prices. Elasticity shows how people react to price changes. If a small price increase causes people to buy much less, demand is elastic. Consumer behavior. Consumer behavior explains why people buy products and services. People’s decisions depend on their needs, preferences and income. Cost and profit: businesses spend money to produce goods and services. Profit is the money a business earns after subtracting costs from revenue. What is macroeconomics? Macroeconomics studies the economy as a whole. It focuses on large-scale economic issues that affect countries and the world. Macroeconomics includes GDP, gross domestic product. GDP is the total value of all goods and services produced in a country during a specific period. It helps measure the size and strength of an economy. Inflation is the general increase in prices over time. When inflation rises, money buys fewer goods and services. Unemployment. Unemployment refers to people who are willing and able to work but cannot find jobs. Economic growth occurs when a country’s production of goods and services increases over time. Fiscal policy. Fiscal policy involves government decisions about spending and taxation to influence the economy. Monetary policy. Monetary policy is managed by a country’s central bank. It involves controlling interest rates and the money supply to maintain economic stability.