ECN 104 Lecture Notes - Lecture 2: Demand Curve, Economic Equilibrium, Inferior Good
11 Oct 2016
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Document Summary
Models play a crucial role in economics. A model is a simplified representation of a real life situation that is used to better understand real-life situations: creating a real but simple economy. Example: cigarettes in wwii prison camps, used cigarettes as 30694, loaf of. The other things equal assumption means that all other relevant factors remain bread costs 5-6 cigarettes unchanged. Models allow you to change one thing in artificial economies, but everything else remains constant. Resources are scarce so economies face trade off (principle #1) To think about these trade-offs, a simple model known as ppf (production possibilities. Simplification: imagine canada is a one company economy (bombardier), which can produce two goods (trains and jets) Ppf how many trains could canada produce if it is producing a given amount of jets: you can then analyze: feasibility, efficiency (prod), opportunity cost and econ. growth. If points lie on the ppf, they are feasible and efficient in production.
