ECN 104 Chapter Notes - Chapter 2: Ryerson University, Opportunity Cost, Scientific Method
14 Sep 2013
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Document Summary
Economists play two roles: scientists- try to explain the world, policy advisors- try to improve it. Economists use the scientific method , the dispassionate development and testing of theories about how the world works. Assumptions: simplify a complex world, and make it easier to understand: e. g. when you study international trade, you assume two countries and two goods are being traded. This is an assumption, because it would be assumed that two countries would be equally contributing their goods with the other and that two countries would be needed to perform a trade. Model: a highly simplified representation of a more complicated reality. A visual model of the economy, shows how dollars flow through markets among households and firms. Two types of actors : households, firms. A graph that shows the combinations of two goods the economy can possibly produce given the available resources and the available technology.
