Learning Module 2 - Learning Module #2: Thinking Like an...

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Learning Module #2: Thinking Like an Economist Introduction Managers Making Choices at Mike Shoes When you think of high performance athletic shoes, the ones worn by star athletes, you may think of Mike Shoes. Suppose the managers of Mike are faced with a fixed amount of production resources, that is workers and machines. They must decide how to use this production capacity among its various shoes. Since there is a limited amount of resource, there will be a trade-off between the production of the two goods; that is, the more of one good produced, the less of the other good which can be produced. Some of the questions, choices and business decisions that they face include: 1.What is the maximum amount of output Mikes Shoes can produce each day? 2.How many tennis shoes to produce each day and how many basketball shoes to produce? 3.What is the trade-off between tennis shoes and basketball shoes? Mike Shoes must decide how to allocate its limited production resources between various athletic shoes. Learning Module #2: Thinking Like an Economist Learning Module Objectives By the end of this module, students should understand: 1.how economists apply the methods of science. 2.how assumptions and models can shed light on the world. 3.two simple models-the circular flow and the production possibilities frontier. 4.the difference between microeconomics and macroeconomics. 5.the difference between positive and normative statements. 6.the role of economists in making policy. 7.why economists sometimes disagree with one another. Module 2.1 - The Economist as a Scientist The Scientific Method The economic way of thinking . . . Involves thinking analytically and objectively. Economists follow the scientific method. Uses abstract models to help explain how a complex, real world operates. All models are abstractions. A model train abstracts from the size of the real thing. It captures the essential points of a train, but it will not run on real tracks and it will not carry freight because it lacks the size and the complexity. A playhouse is a model, and models of proposed commercial buildings are often seen in the open areas in retail malls. These models are all built to show essentials without important details - size being a major detail. Economic models are much the same. They are constructs made of words, mathematical symbols, graphs, and flow diagrams that show how some complex relationship from the real world actually works. Observations help us to develop theory. Data can be collected and analyzed to evaluate theories. Using data to evaluate theories is more difficult in economics than in physical science because economists are unable to generate their own data and must make do with whatever data are available. Thus, economists pay close attention to the natural experiments offered by
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This note was uploaded on 03/01/2012 for the course ENC 101 taught by Professor Green during the Spring '12 term at University of Florida.

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Learning Module 2 - Learning Module #2: Thinking Like an...

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