ECON 201 Lecture Notes - Lecture 4: Scientific Method, Opportunity Cost
19 Sep 2016
School
Department
Course
Professor
Document Summary
They ask a question and attempt to prove their theory through data just like a normal scientist. Economist utilize the scientific method to make decisions. Assumption simplify the complex world, make it easier to understand. Example: to study international trade, assume two countries and two goods. Unrealistic, but simple to learn and it gives us insights into the real world. Model: a highly simplifies representation of a more complicated reality. A visual model of the economy, shows how dollars flow through markets among households and firms. Factors of production: the resources the economy uses to produce goods and services. Own the factors of production and sell them to the firms. Buy the factors of production and use them to produce goods and services goods and services. This is ideal, in reality there are government that divert the flow in this diagram.
