ECON 1040 Lecture Notes - Lecture 2: Trade Restriction, Positive Statement, Import Quota
Document Summary
Economists play two roles: scientists: try to explain the world, policy advisors: try to improve it. In the first, economists employ the scientific method, the dispassionate development and testing of theories about how the world works. Assumptions simplify the complex world, make it easier to understand: example: to study international trade, assume two countries and two goods unrealistic, but simple to learn and gives useful insights about the real world. Models: a highly simplified representation of a more complicated reality. A visual model of the economy, shows how dollars flow through markets among households and firms. Own the factors of production, sell/rent them to firms for income. Buy and consume goods and services: firms. Buy/hire factors of production, use them to produce goods and services. Two markets: the market for goods and services, the market for factors of production . The resources the economy uses to produce goods and services, including labor, land, capital.
