2 Econ Class notes - a. Two markets i. Goods and services...

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Thinking like an economist I. Economists are scientists a. They analyze and study the subject with a great deal of objectivity b. Scientific method i. Observe ii. Form hypothesis iii. Use hypothesis to predict iv. Test theory v. Testing your theory 1. assumptions 2. Choosing the right assumptions is the art of scientific thinking 3. You must be realistic and simple a. Models i. Assumptions then create models ii. models are generally composed of equations and diagrams iii. simplify reality to increase understanding 1. Economists omit details Circular flow diagram ( p.23) a. Visual model of the economy that shows how dollars, good, and services flow through markets among households and firms
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Unformatted text preview: a. Two markets i. Goods and services ii. Factors of production-inputs into the production process 1. land, labor, capital iii. Two agents 1. households 2. firms Production possibilities frontier-PPF a. graph that shows combinations of output that the economy can produce given the available factors of production and production technology II. Economist as a policy advisor a. Positive statement i. Describe how the world is b. Normative statement i. Prescribe how the world should be c. they make positive statements followed by normative ones...
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This note was uploaded on 04/08/2008 for the course ECONOMICS 211 taught by Professor Petitfrere during the Fall '08 term at University of Miami.

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2 Econ Class notes - a. Two markets i. Goods and services...

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