The study of economics can be broken up into two distinct branches: microeconomics and macroeconomics. In many ways, these fields are two sides of the same coin: they have differences, but both intertwined contribute to our understanding of economics as a whole.
Microeconomics is the study of individual decision-making. Individual could mean an individual person, or an individual company or firm. Microeconomics zooms in on the role that the choices made by these individual entities play in the larger economy. It studies the motivations behind these choices—called incentives—as well as the effect that these choices have. Microeconomics focuses on individual producers and consumers and the laws of supply and demand that dictate the prices that producers set and that consumers are willing to pay for.
As it centers around individual behavior, Freakonomics is largely concerned with microeconomics. Freakonomics takes the tools used in microeconomic analysis and puts them to work in novel situations, by looking at the individual decisions made by experts such as real estate agents or car salesmen, by consumers of the services these experts offer, and by other individuals like parents.
Macroeconomics, on the other hand, works on a larger scale. Rather than individual firms and consumers, macroeconomics studies entire economies and economic systems. Macroeconomics looks at national economic phenomena like Gross Domestic Product (GDP), as well as changes in the wide economy like national unemployment or trade and exports. Where microeconomics takes a bottom-up approach to the field, macroeconomics instead takes a top-down approach.
Both fields, however, are hugely interdependent. One cannot exist without the other, and knowledge of both is necessary for any professional in economics.
