Econ Chapter 2
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Economists must use whatever data the world happens to give them
- economics are based on theories (ie law of demand)
- economics is empirical science b/c data is proof of validity of theory
- look at history as well to support it
Economics Make Assumptions
- *reason why econ is not a science and can't experiment
- Assumptions can simplify the complex world and make it easier to understand.
suppose Susan worked overtime at harris teeter and earned $100 more. Where is she on the circular flow model?
Real flow factors of production and money flow of income
Production Possibility Frontiers
- bowed out shaped curve
- make max of x with no y or max of y with no x and combination of those
- anything in the middle is INEFFECTIVE (probably unemployment or not efficient)
- anything outside is economic growth
- anything outliar outside is future
- If slope of PPF changes then technology in one sector increased
the study of how households and firms make decisions and how they interact in specific markets
For economists, there are two types of statements about the world
- claims that attempt to prescribe how the world should be
- the government SHOULD raise the minimum wage
- claim that attempts to describe the world as is
- minimum wage laws cause unemployment
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