ACC 406 Lecture Notes - Lecture 2: Substitute Good, Planned Economy, Mixed Economy
4 Mar 2016
School
Department
Course
Professor
Document Summary
Ecn 104- thinking like an economist (week 2) One that allocates resources through the decentralized decisions of firms and households. Households decide what to buy and who to work for. Firms decide who to hire and how much to produce. One where all production and distribution decisions are made by a central authority, like a government. Most economies are mixed economies a combination of both. Economists play two roles: scientists: try to explain the world, policy advisors: try to improve it. In the first, economists employ the scientific method, the dispassionate development and testing of theories about how the world works. Assumptions 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 gives useful insights about the real world. Model: a highly simplified representation of a more complicated reality.
