2 Friday, August 25, 2006

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Friday, August 25, 2006 Microeconomics MICROECONOMICS looks at how individuals (household and firms) Interact. MACROECONOMICS looks at the collective behavior of all individuals. POSITIVE ECONOMICS looks at the outcome of economics behavior without making value judgments. NORMATIVE ECONOMICS makes value judgment about economic behavior. ECONOMICS is the science, and the ECONOMIC MODEL is used to study it. ECONOMIC MODEL (simplification of reality) To simplify reality, we have to make assumptions and Economists often make assumptions that are unrealistic. PRODUCTION is the process of turning inputs into outputs. INPUTS (Resources) Labor Capital (machines and Equipment) Factory Outputs Raw Materials (land and oil) TECHNOLOGY is the state of knowledge about the production process. Greater Technology is the Greater the Outputs from a given set of inputs. (Ex. Assembly Line) PRODUCTION POSSIBILITIES FRONTIER (PPF) Assumptions 1. Quantity and quality of resources is fixed throughout the year. 2.
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2 Friday, August 25, 2006 - Friday, August 25, 2006...

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