L2 - THE ECONOMIST AS A SCIENTIST The economic way of...

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THE ECONOMIST AS A SCIENTIST The economic way of thinking . . . ± Involves thinking analytically and objectively. ± Makes use of the scientific method. ± Uses to help explain how a complex, real world operates. ± Develops , collects and analyzes data to evaluate the theories.
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Economists make in order to make the world easier to understand. The art in scientific thinking is deciding which to make. Economists use different to answer different questions. The Role of Assumptions
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Economic Models The most basic economic models are: The Circular Flow Diagram The Production Possibilities Frontier Supply-Demand Model Everyday economists try to make a new model to explain, estimate, predict something.
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Our First Model: The Circular-Flow Diagram The circular-flow diagram is a visual model of the economy that shows how dollars flow through markets among households and firms. Two players Households Firms Two markets Markets for goods and services Markets for factors of production
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Figure 1 The Circular Flow Spending Goods and services bought Revenue Goods and services sold Labor, land, and capital Income = Flow of inputs and outputs = Flow of dollars
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This note was uploaded on 02/15/2010 for the course ECON 2106 taught by Professor Minjaesong during the Spring '06 term at Georgia Institute of Technology.

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L2 - THE ECONOMIST AS A SCIENTIST The economic way of...

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