ECON 200 Lecture Notes - Lecture 2: Ceteris Paribus, Opportunity Cost, Allen Edmonds
20 Jan 2019
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The scientific method: positive analysis, testable, normative analysis, opinion. Modeling: models are simplistic, but they can emphasize key concepts, change only one variable at a time, ceteris paribus, or holding other things constant. Judge models by how well they work in real life: endogenous and exogenous factors, endogenious = built into the model, exogenous = the factor that impact how the model performs, watch out for faulty assumptions! Opportunity cost example: opportunity cost: the highest-valued, next-best alternative that must be sacrificed to attain something or satisfy a want, example #1, consider the true costs of traveling from tucson to san diego by plane or bus. Suppose: bus costs: and takes 16 hours r/t, plane costs: and takes 6 hours r/t, you value your travel time at an hour, should you take the bus or the plane, bus: +16 *. =: example #2, now suppose that you do not know the value of the person"s time.
