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Lecture 2

ECON-101 Lecture Notes - Lecture 2: Jasper Place, Alberta, Tim Hortons


Department
Economics
Course Code
ECON-101
Professor
Junaid Jahangir
Lecture
2

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CHAPTER 2: ASSUMPTIONS &
MODELS
(ASSUMPTION) CETERIS PARIBUS: ALL ELSE HELD
CONSTANT
- Always have to take into consideration other variables
- Therefore, if comparing between 2 variables, other variables need to
be assumed to be held constant
oEx) Ice cream = f(weather, taste, income (I), price (P), cost of
alternatives (ps – price of substitute), price of compliments (pc))
Price of ice cream decreases because demand decreases
but there are other variables that need to be considered
oEx2) Increase in minimum wage, decrease in employment
because other variables take place
(MODEL) CIRCULAR FLOW MODEL
Resources 4ow from one section of the economy to another section and then
back again
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Ex) Tim
Hortons:
- You can work at Tim Hortons (Labour)
- You can provide capital (Customer)
- You can own Tim Hortons (share holders) – back to you through
dividence
- You provide loans to Tim Hortons (Banks)
Pro7t = Total Revenue – Total Cost
How to get economy out of recession? Put money back into the economy
Fiscal Stimulus Plan: Increases government spending (development
projects) creates jobs and puts money back into the economy
Monetary Stimulus: Bank of Canada lower interest rates – corporations cost
of borrowing, larger chance of wanting to invest
- Invest in research + development
- Invest in infrastructure
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