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Unformatted text preview: Goods are allocated according to consumer preferences Production at lowest cost Equity—how incomes and goods are distributed; a “fair” distribution of income Economic Theory/ Economic Models Markets Competitive Non-Competitive OPEC 1. Assumptions—assume that the consumers get the best 2. Hypothesis (theory) 3. Testing the hypothesis with data 4. Accept make predictions 5. Rejected look for a new theory Economic Theory Microeconomics Macroeconomics 1 Consumer Total consumption expenditure 1 Producer Total output 1 Investor Total investment 1 Worker Total employment 1 Market Total economy Positive economics Explain events Normative economics (welfare economics) What should be done?...
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