ECON 105 Lecture Notes - Lecture 2: Normative Economics, Business Cycle, Classical Economics

• School: Simon Fraser University
• Department: Economics
• Course: ECON 105
• Professor: Junjie Liu

Document Summary

Seller agent receives if you accept offer for . If you wait 2 weeks longer and sell the apartment for , seller only gains ,684. Two roles played by economists: scientist: try to explain the world. Makes positive statements: policy advisers: try to improve the situation. The scientific method: development and testing of theories about how the world work, Newton s development of theory of gravity after observing an apple fall from a tree. Interplay between theory and observation also occurs in the field of economics. Assumptions simplify the complicated reality and makes it easier to understand. Ex. when studying gains from trade, we assume the economy consists of two people and two goods. The 2x2 economy is unrealistic, but it simplifies the problem and yields useful insights about the more complicated real situation. A model is a highly simplified representation of a more complicated reality that allows us to observe, understand, and make predictions about economic behavior.