ECON 1001 Lecture Notes - Lecture 2: Scientific Method, Money Supply, Longrun

• School: Carleton University
• Department: Economics
• Course: ECON 1001
• Professor: Eng Kooi Lim

Document Summary

For economic policymakers, it poses a difficult choice about how best to respond. Households: own the factors of production, sell/rent the factors of production to the firms for income, buy and consume goods & services. Firms: buy/hire factors of production, use them to produce goods and services, sell goods & services to households, want to maximize their profit, use resources in order to maximize their profit. Circular flow diagram(picture of economy in a nut shell) If you do not use all the resources you have then you are inefficient because you can produce more. Exercise: find the opportunity cost of wine and cloth in france and england. Note: there is no negative sign because it is implied that we are giving up something. It is possible for us to produce resources: we assume that the ppf is linear, but it is actually often that it is bow-shaped because it is often the products we are using are not linear.