Lecture 1- Introduction and Economic Models

Lecture 1- Introduction and Economic Models - Most students...

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Most students who take economics leave the course without really having learned even the most important basic economic principles. Their ability to answer simple economic questions several months after leaving the course is not measurably different from that of people who never took a principles course.* *Hansen, W. L., M. K. Salemi, and J. J. Siegfried. 2002. Use it or lose it: teaching economic literacy. American Economic Review (Papers and Proceedings), 92 (May): 463-72.
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“I’d like to introduce you to Marty Thorndecker. He’s an economist but he’s really very nice.”
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Economics Economics is the study of how best to allocate scarce resources among competing uses.
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Microeconomics and Macroeconomics Microeconomics is the study of how households and firms make decisions and how they interact in markets. Macroeconomics is the study of economy-wide phenomena, including inflation, unemployment, and economic growth. These two branches of economics are closely intertwined, yet distinct: they address different questions.
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Economics and Managerial Decision Making Managerial economics is the use of economic analysis to make business decisions involving the best use (allocation) of an organization’s scarce resources.
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Assumptions & Models Assumptions simplify the complex world, make it easier to understand. Example: When studying international trade, we might assume the world consists of two countries and two goods. Economists use models to study economic issues. A model is a highly simplified representation of a more complicated reality.
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Some Familiar Models A road map
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Some Familiar Models A model of human anatomy from high school biology class
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Some Familiar Models A model airplane
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Some Familiar Models The model teeth at the dentist’s office Don’t forget to  floss!
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The Economist as Scientist Economists play two roles: Scientists: try to explain the world Policy advisors: try to improve it In the first role, economists employ the scientific method : the dispassionate development and testing of theories about how the world works. As scientists, economists make positive statements , which attempt to describe the world as it is.
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The Economist as Policy Advisor As policy advisors, economists make normative statements , which attempt to prescribe how the world should be.
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This note was uploaded on 12/02/2011 for the course ECON 200 taught by Professor Vincent during the Fall '08 term at Maryland.

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Lecture 1- Introduction and Economic Models - Most students...

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