ECON281 Lecture 2: 2

• School: University of Alberta
• Department: Economics
• Course: ECON281
• Professor: Lorne Priemaza

Document Summary

In the real world, many exogenous variables are moving at the same time; affecting many endogenous variables: comparative statics aims to measure the effect a change in one exogenous variable on one endogenous variable. Originally, assume that the ipad market is in equilibrium, with qsupply = qdem. Assume that due to a lifting of tarrifs, ipad input costs have decreased. Analyze this effect on equilibrium price and quantity. Reduced tariffs have resulted in a decrease in ipads prices and an increase in ipads sold. In order to carry out effective policy, the policy maker must understand how the economy works. The is called positive economics; the economics of facts & theory ie: minimum wage increases causes unemployment increases. In order to conduct policy, the policy maker must have some goals in mind. Normative economics is the study of what the goals of the economy should be ie: we should lower the minimum wage in order to lower unemployment.