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Lec4 - analysis and testing 2 Normative economic statements...

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Lecture 4 01/25/2011 Why do we shift the possibility curve inward? To lower the standard of living. A point inside the curve = unemployment. To help the curve significantly shift out: more technology, smarter labors, more effective labors. Production possibilities are very important: 1. Outside the possibility curve: impossible, borrow money from other countries, more capital, resources, greater production capabilities. a. It raises the standard of living of the people 2. Get Review Sheet 2 POSITIVE AND NORMATINE ECONOMIC STATEMENTS 1. Positive economic statement : describes the facts of the economy – it deals with what is believed about the way the economy works = cause and effect relationships – subject to
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Unformatted text preview: analysis and testing. 2. Normative economic statements : involve value judgements that cannot be empirically tested. Ethical standards and norms of fairness underlie normative economics ( a person’s judgement, how a person feel) 1. Law of Demand a. The higher the price the less the quantity demanded the lower the price the greater the quantity demanded—All other things held constant b. The line is a picture of the law of demand c. Law of demand only deal with PRICE and QUANTITY (nothing else) i. Income/Wealth ii. When referring to supply and demand curve, do not say up and down , say left and right iii. Number of consumers iv. Price of substitute goods 2. Demand Schedule 3....
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