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Lecture 1

ECON 1P92 Lecture Notes - Lecture 1: Opportunity Cost, North American Free Trade AgreementPremium


Department
Economics
Course Code
ECON 1P92
Professor
Indra Hardeen
Lecture
1

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JANUARY 7TH-LECTURE #1
CHAPTER 2: THINKING LIKE AN ECONOMIST
MICRO VS MACRO
Macro deals with international trade
Micro deals with firms and individuals
Macro deals with the entire economy → all firms, all individuals
→ the big picture
Macro - GDP, Unemployment, CPI, Inflation, Recession (negative economic
growth)
Macro - deficits and debts, fiscal policies (government spending and taxation),
interest rates, exchange rates.
CHAPTER 2 BEGINS HERE
Economics is a social science not natural science
- Came from philosophy
- Essentially became mathematical and scientific inquiry
Method of inquiry
Scientific method observation
Observation → theory → more observation
Example: economist observes increasing prices, develops theory of inflation

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- Prices rise when governments print too much money
- Collects data on many prices from many countries → more
observation
Economists have to make assumptions → to simplify the complex
world → easier to understand concepts
Example: International Trade
Assume 2 goods and 2 countries
Economic Models
Circular Flow Diagram
- Represents the organization of
the family
- Households
- Firms
- Factors of production: Land,
Labour, and Capital (buildings
and machines and equipment)
- FOP can also be referred as
INPUTS.
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