ECON 2100 Lecture Notes - Lecture 2: Opportunity Cost
Document Summary
Economists play two roles: scientists: try to explain world, policy advisors: try to improve it. Scientific method in economics - development and testing of theories about how the world works. Assumptions - simplify the complex world and make it easier to understand. Model - a highly simplified representation of a more complicated reality ( all else equal ) - a device used to analyze the relationship between two. Ceteris paribus variable while the values of other variable remain unchanged. What can be true for a part does not necessarily make it true for the whole. A visual model of the economy; shows how dollars flow through markets among. Two markets: households and firms: the market for goods and services, the market for factors of production . Factors of production - the resources the economy uses to produce goods and services such as land, labor, and capital.
