Microeconomic Notes Chapter 2
Microeconomic Notes Chapter 2 ECON 2010
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This 2 page Class Notes was uploaded by Christopher Maisonneuve on Sunday January 24, 2016. The Class Notes belongs to ECON 2010 at Western Michigan University taught by Kim in Fall 2015. Since its upload, it has received 13 views. For similar materials see Principles of Microeconomics in Economcs at Western Michigan University.
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Date Created: 01/24/16
Microeconomics Chapter 2 Economics is a science just like physics o Similarities- When you have a hypothesis you have to back it up or prove it o Difference- We can not run controlled experiments because we can’t actually do experiments on people Economists look at the natural experiments through out history and use statistical methods to test the models Economic models Using scientific method o Observation and measurement o Model building o Testing models The goal of economic models is to Simplify reality to increase our understanding of the world o The world is so complicated the model would be heard to solve Mathematically o So what we do is drop all unnecessary things out Positive Statement VS Normative statements Positive Statement o Claims that attempt to describe the world as it is o Ex. I think today's temperature is 65 degrees Normative Statement o Claims that attempt to prescribe how the world should be o Ex Today's temperature is 65 degrees => Positive statements can be evaluated using data, while normative statements involve personal viewpoints Examples GDP fell by .5% during last quarter Positive The government should print less money Normative The DOW rose above 15,00 0n may 3, 2013 Positive Video Correlation is when two things are related but are more coincidence Causation is when you can claim another thing can happen o You must prove a cause and effect relationship A drug must be able to prove what to says it can through years off studies Correlations are easy to show Causation is hard to prove The production Possiblity Frontier(PPF) The Production Possibilities Frontier o A graph that shows the combinations of two goods the economy. Can possibly produce given the available recourses and the available technology EXAMPLE: o Two goods: computers and wheat o One resource: Labor (measured in hours) o Economy has 50,000 labor hours per month available for production o Producing one computer requires 100hours of labor o Producing one ton of wheat requires 10 labor hours Employment of labor hours Production Computers Wheat Computers Wheat A 50,000 0 500 0 B 40,000 10,000 400 1000 C 25,000 25,000 250 2,500 D 10,000 40,000 100 4,000 E 0 50,000 0 5,000
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