ECN 001A Lecture Notes - Lecture 2: Scientific Method, Opportunity Cost
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ECN 001A Full Course Notes
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The economist as a scientist ( of economists) Employs the scientific method: the dispassionate, unbiased development and testing of theories about how the world works. Take the knowledge learned by economists and try to improve the world. Assumptions make the complex world easier to understand. Model: a highly simplified representation of a more complicated reality. Shows how dollars flow through the markets among 2 types of actors: households and firms. 2 markets: goods & services market and the market for factors of production . Factors of production: the resources the economy uses to produce goods & services labor, land, capital (buildings and machines used in production) A graph that shows all of the combinations of 2 goods the economy can possibly produce (efficiently) given the available resources and technology. Illustrates the concepts of tradeoff/opportunity cost, efficiency/inefficiency, unemployment, and economic growth. 50,000 labor hours/100 labor hours = 500 computers. Efficient (all resources are fully utilized) not efficient (some resources underutilized)
