ECN 201 Lecture Notes - Lecture 2: Opportunity Cost
Document Summary
Microeconomics: individual decision making and interaction in the market place. Macroeconomics: economic aggregates like employment, output, growth and inflation (whole picture) Positive: describe the world today, how it was or will be (no value judgement, economists as scientists: unemployment is rising, dvvd players are cheaper today than when they were first introduced. Normative: prescribe how the world should be, judgements as to what is good and bad (policy advisors: the 6% unemployment rate is too high, dvd players should not be so expensive. Key difference: how to judge validity: positive: verified or refuted by collecting and analyzing data. Unemployment is rising: normative: involves values and facts. Your opportunity cost of watching tv is the value of the book you didn"t read: if you read a book, your opportunity cost is the value of the tv program you didn"t watch. Scientific method: devise theories; collect/analyze data to refute or verify theories: assumptions.
