ABSTRACT
The division between micro- and macro-economics is essentially a matter of convenience. It is expedient to make this distinction partly because the problems differ and partly because the method of analysis differs between the two branches. Chapter 2 dealt with the workings of individual markets. The basic problem was seen to be the determination of the allocation of resources, and the basic theory that of the determination of relative prices through supply and demand. A different line of thinking begins by asking what determines whether the resources will in fact be used. The basic problem in macro-economics is the determination of the flow of income and the basic theory is the model of the circular flow of income.
