ECON 1000 Lecture 1: Ch 2 reading notes
15 Mar 2016
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Economists try to address their subject with a scientist"s objectivity: devise theories, collect data, analyze to very their theories. Differ from scientists as conducting experiments is often difficult and sometimes impossible for economists: cant" manipulate nations monetary policy to generate useful data, pay close attention to natural experiments offered by history. Economists use different assumptions to answer different questions. Economists use models to learn about the world: simplify reality to improve our understanding. Circular-flow diagram: a visual model of the economy that shows how dollars flow through markets among households and firms. Diagram specifics: two types of decision makers. Produce goods and services using inputs: ex: labor, land, capital. Consume all the goods and services that the firms produce. Market for goods and services: households are buyers. Buy output of goods / services that firms produce: firms are sellers. Market for the factors of production: households are sellers.
