ECN 204 Chapter 2: Chapter 2.docx
15 Mar 2012
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Document Summary
The economist as scientist scientific method - dispassionate development and testing of theories about how the world works. Not allowed to manipulate to generate useful data. Natural experiment offered by history insight into the ecn of past illustrate and eval ecn theories of present. Assumptions can simplify the complex world and make it easier to understand. Prices in ecn change infrequently/ don"t change much. Ecn use diff assumptions when studying the short run and long run effects of change in the long run effects: prices completely flexible quantity of $ Models to learn about the world of diagrams and equations. Omit many details to allow us to see what is truly important. Production possibilities frontier - graph show combinations of output that ecn can possibly produce the available factors of production and the available production technology that firms can use to turn these factors to output. Ecn can produce any combination on/ inside the frontier.
