Economics sets out to explain and analyse the ways in which economic agents — people, firms or governments — make economic decisions. It also tries to understand the implications of this decision-making process for society.
Putting it all together is a bit like a jigsaw puzzle: you start with lots of pieces that look different, but then you assemble them to end up with a coherent picture, in which every piece has a part to play. One of the most important pieces of the economics jigsaw puzzle concerns incentives, which are inextricably linked with the motivations that drive consumers, firms and the government. Another important part of the jigsaw is the nature of signals to which economic agents will respond.
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