ECON 1BB3 Chapter Notes - Chapter 2: Opportunity Cost, Normative Economics
12 Nov 2012
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ECON 1BB3 Full Course Notes
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Natural experiments: collecting data based on natural phenomena that occur (sometimes due to government intervention). E. g. war in the middle east allows for info to be collected about how oil prices affect the world"s economies. Assumptions are used in economics to simplify the complex world and make it easier to understand. Different assumptions need to be made depending on the study. Used to simplify reality in order to improve our understanding of it. All use assumptions, and omit many details. Visual model of the economy that shows how dollars flow through markets among households and firms. Firms produce goods and services using factors of production. Factors of production are inputs such as labour, land (natural resources), and capital (buildings and machines) Households own the factors of production and consume all of the goods and services that the firms produce. Households and firms interact in 2 types of markets: market for goods and services: households are buyers and firms are sellers.
