In this first half of the book we focus on microeconomics. Despite being 'small economics' - in other words, the economics of the individual parts of the economy, rather than the economy as a whole - it is still concerned with many of the big issues of today.
We will study why the pattern of production and consumption changes over time; why some people are rich and others poor; why our lives seem to be dominated by market forces beyond our control. We will look at the world of big business at one extreme and highly competitive markets at the other. We will look at many of the seemingly intractable problems we face: from the growing problem of pollution, to our limited power as consumers, to the widening inequality of incomes in society.
In this chapter, we examine how different economies of the world answer the key microeconomic questions of 'what to produce', 'how to produce' and 'for whom to produce'.
We start by looking at how economies would work if they were run totally by the government and did not rely on markets at all. We then look at the other extreme and consider economies that rely totally on the market. We will look at how markets work. We will examine what determines how much of any product gets produced and sold, and why some goods rise in price, whereas others fall. In the process we will be looking at one of the most important theories in the whole of economics: the theory of supply and demand.
