COMMERCE 1BA3 Lecture Notes - Lecture 2: Department Of Finance Canada, Fraser Institute, Exact Sciences
7 May 2016
School
Department
Course
Professor
Document Summary
Economists use a language of terms to view the world in a certain way. Economists try to address their subject with a scientist"s objectivity. Like scientists, economists develop theories and then test them. Economists use assumptions to simplify the complex world and make it easier to understand: e. g. when studying trade, pretend that there are only two countries. Use different assumptions based on situation and time scale: e. g. for short term, you can assume prices of goods are fixed, for long term, you assume that they change. Economists often use models consisting of equations and diagrams. The models often omit many details to allow us to see what is truly important. All models are built with assumptions- they simplify reality in order to improve our understanding of it. Circular-flow diagram- a visual model of the economy that shows how dollars flows through markets among households and firms. Assumptions: 2 types of decision makers that interact in 2 market types.
