Lecture # 3
1. Why is economics difficult?
a. Express ideas in economics
i. English language
b. Translate between each different form of communication
2. Economics is a Social Science
a. Social = people
b. Science = use scientific method
iii.Test theory (If results fail theory, go back to theorize) Natural
3. Microeconomics Vs. Macroeconomics
a. Microeconomics: Individual households & firms and how they interact.
b. Macroeconomics: Economy wide phenomena such as interest rates,
unemployment, money and growth.
4. Efficiency Vs. Equity
a. Efficiency is the size of the pie. Making a bigger pie with the same ingredient.
b. Equity is how the pie is divided.
5. Positive Vs. NormativeAnalysis
a. Positive: Describe the world as it is. Attempt to Describe the world, doesn’t have
to be correct. i. Example: The world is flat.
b. Normative: Describe the word as we would like it to be. (Value Judgement)
i. Example: It’s a bad thing that the world is flat because we might fall of the
c. The difference between positive and normative is that a positive analysis can be
given without appealing to your values.
6. Model = Simplification
a. Model would be diagrams or equations
d. Amap of a city (Strip