Economics can be broadly split into two areas: microeconomics, dealing with firms, individuals and markets, and macroeconomics that deal with the economy as a whole. In this column I will explain some microeconomic theory and move on to discuss current issues in macroeconomics. Along the way I will challenge you to think about the ideas presented.
Peter Smith’s ‘Topical issues’ column demonstrates how economic theory can be applied to situations where it is not obviously applicable. The article looks at how having a positive externality in the market can cause the quantity of a good produced in the free market to be less than the socially optimal quantity.
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