Economics is about decision making under scarcity, in which wants are unlimited, but resources are limited. Economics is the study of how individuals, firms and societies make decisions to allocate limited resources. Economics is all about how people respond to incentives: microeconomics vs macroeconomics. Microeconomics: the study of the decision making of individuals, business, and industries. Business decisions (what to produce and what price to charge) Whether a market should be left on its own or be regulated. Macroeconomics: the study of broader issues affecting the economy as a whole. International trade and international finance: economics modeling: Developing a tool that allows us to answer a research question. Stylized (simple): a model which makes simplifying assumptions to make it easier to get a clear answer to the question. Ceteris paribus: holding all other things equal: efficiency versus equity. Efficiency: how well resources are used and allocated. Production efficiency occurs when goods are produced at the lowest possible cost.