EC120 Lecture Notes - Lecture 2: Negative Number, Microeconomics, Opportunity Cost

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11 Feb 2014
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EC120 Full Course Notes
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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. Model: a highly simplified representation of a more complicated reality. Economists use models to study economic issues. (the production possibilities frontier) The production possibilities frontier (ppf) : a graph that shows the combinations of two goods the economy can possibly produce given the available resources and the available technology. Economy has 50,000 labour hours per month available for production. What we know so far about the ppf: Points on the ppf (like a e ) possible efficient: all resources are fully utilized.

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