ECON 201 Chapter Notes - Chapter 2: Congressional Budget Office, Opportunity Cost
31 Jan 2017
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Document Summary
The scientific method: observation, theory, and more observation interplay between theory and observation occurs in economics. To find a substitute for laboratory experiments, economists pay close attention to the natural experiments offered by history. Assumptions can simplify the complex world and make it easier to understand. Can focus our thinking on the essence of the problem. The art in scientific thinking whether in physics, biology, or economics is deciding which assumptions to make. Economists use different assumptions to answer different questions. Economists use different assumptions when studying the short-run and long-run effects of a change in the quantity of money. Economic models omit many details to allow us to see what is truly important. All the models are built with assumptions. Economists assume away many details of the economy that are irrelevant to the question at hand. All models in physics, biology, and economics simplify reality to improve our understanding of it.
