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Economics 1 Chapter 2 Notes

by: Daniel Ochs

Economics 1 Chapter 2 Notes econ 1

Daniel Ochs

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Chapter 2 Notes
Principles of Economics
Class Notes
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Popular in Principles of Economics

Popular in Economcs

This 2 page Class Notes was uploaded by Daniel Ochs on Thursday April 7, 2016. The Class Notes belongs to econ 1 at University of California - Los Angeles taught by Convery in Spring 2016. Since its upload, it has received 35 views. For similar materials see Principles of Economics in Economcs at University of California - Los Angeles.


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Date Created: 04/07/16
Thursday, April 7, 2016 Chapter 2 Thinking Like an Economist - The Economist as a Scientist Scientists: try to explain the worlds • • Policy advisors: try to improve it - Assumptions & Models • Model- a highly simplified representation of a more complicated reality - Circular-Flow Diagram • Visual model of the economy, shows how dollars flow through markets among households and firms - Production Possibilities Frontier [Graph] • Graph that shows the combinations of two goods the economy can possibly produce given the available resources and the available technology • Absolute Advantage: The Ability to proceed a good using fewer inputs than another producer • Comparative Advantage- The ability to produce a good at a lower opportunity cost than another producer • Slope of PPF graph is opportunity cost • Economic Growth increases productivity (graph up and to the right) [Shifts PPF outward] • PPF bow-shaped when different workers have different skills - Economists as Policy Advisors • Positive statements: attempt to describe the world as it is - [Testable Theory] Can be confirmed or refuted • Normative statements: attempt to prescribe how the world should be - [Opinion Based] Cannot be confirmed nor refuted 1 Thursday, April 7, 2016 - Summary • As scientists, economists try to explain the world using models with appropriate assumptions • Two simple models are the Circular-Flow Diagram and the Production Possibilities Frontier (PPF) • Microeconomics studies the behavior of consumers and firms, and their interactions in markets & Macroeconomics studies the economy as a whole • As policy advisers, economists offer advice on how to improve the world 2


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