ECON 160 Lecture 2: Chapter 2 Notes
30 Aug 2016
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Based on simplifying assumptions about the world. Test models with data; based on models to come up with position statements. Ex: increase in tax on gas leads to more fuel-efficient cars being bought o. Ex: gas tax should be increased o o. Government provisions of infrastructure leads to high worker productivity. Circular flow model: description of a simplified economy. Two economic agents: someone faced with economic decision. Factors of production (fop): inputs that help in the process of production; ex: land, machines/capital, hired workers. All land is owned by a household. All people own labor (they work) o. Production possibility frontier (ppf): shows the various combinations of output that an economy can produce given the available resource + technology. 1 computer = 100 hours; 1 ton wheat = 10 hours. All points on and under ppf are feasible. All points on ppf are efficient o. Efficient: produce the max given resources + technology.
