Chapter2 - resources it has available b Shows trade-off...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 2: Thinking Like an Economist The Economist as Scientist 1. The Scientific Method: Observation, Theory, and More Observation a. Economists try to address their subject with a scientist’s objectivity b. Tests theory’s, observes, draws conclusions c. Assumptions can simplify the complex world and make it easier to understand 2. Our First Model: The Circular-Flow Diagram a. Circular-flow Diagram: visual model of the economy that shows how dollars flow throughout markets among households and firms b. Schematic representation of the organization of the economy 3. Our Second Model: The Production Possibilities Frontier a. Production possibilities frontier: a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology a.i. With the resources the economy has, the economy can produce at any point on or inside the production possibilities frontier a.ii. Efficient: if the economy is getting all it can from the scarce
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: resources it has available b. Shows trade-off between the outputs of different goods at a given time, but the trade-off can change over time 4. Microeconomics and Macroeconomics a. Micro: the study of how households and firms make decisions and how they interact in markets b. Macro: the study of economy wide phenomena, including inflation, unemployment and economic growth The Economist as Policy Adviser 5. Positive versus Normative Analysis a. Positive Statements: claims that attempt to describe the world as it is b. Normative Statements: claims that attempt to prescribe how the world should be c. Key difference between the two= how we judge their validity c.i. Involves our views on ethics, religion and political philosophy Why Economists Disagree-Economists may disagree about the validity of alternative positive theories about how the world works-Economists may have different values and therefore different normative views about what policy should try to accomplish...
View Full Document

This note was uploaded on 10/16/2011 for the course ECON 201 taught by Professor Shoonlai during the Spring '09 term at Miami University.

Page1 / 2

Chapter2 - resources it has available b Shows trade-off...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online