the marketplace at various possible prices, which then act as signals to businesses about consumers' preferences (see SUPPLY AND DEMAND).
             Rational behavior in the business sector implies that firms direct their efforts toward maximizing profits. To do this they must, first, be responsive to the demands of the household sector for goods and services and, second, combine the labor and material resources they employ in such a way as to minimize their production costs. This is the essence of efficient production. To the extent that it is accomplished, it will yield the largest possible output of goods and services with a minimum expenditure of resources.
             Inquiry into the nature and results of the choices that households and business firms make is the concern of microeconomic analysis, the focus of which is the behavior of the individuals, organizations, and institutions in the economy. Whereas all acts are, of course, individual acts, individuals frequently make decisions and act on behalf of some organization or institution, public or private.
             The study of the behavior of households and business firms is only one part of economic analysis, however. The other part is concerned with the study of the behavior of economic aggregates--macroeconomics (see ECONOMY, NATIONAL). The results of economic performance can be measured in terms of production and income. Chief among the "yardsticks" that measure the economy's overall performance is GROSS NATIONAL PRODUCT, which aggregates the market value of all final goods and direct services produced during the year. The values of intermediate goods (such as raw materials) and indirect services that go into making goods are excluded because their inclusions would result in "double counting" and thus overstate the GNP aggregate. Production costs, on the other hand (wages, rent, interest, depreciation, managerial profits, and taxes), that are incorporated into consumer prices constitute an income s...