ECON 105 Chapter Notes - Chapter 2: Opportunity Cost, Classical Economics, Business Cycle

• School: Simon Fraser University
• Department: Economics
• Course: ECON 105
• Professor: Junjie Liu

Document Summary

Economic theory methods are similar to scientific methods: By observing and gaining theory from what they observe. Assumptions: simplify decisions when it comes to complicated situations that are hard to understand. Economic models: models that economist use or produce for people to understand a certain issue. Best model depends on what you"re trying to do. Map model: determines what"s important and what"s not to get from point a to b. Graphical model: when a visual graph is drawn to symbolize an issue or situation. Mathematical model: a model that uses formulation or equation to describe how economic variables are related. Verbal model: when words are used to symbolize how economic variables are connected. Shows the combinations of output an economy can produce given the available factors or production and the available technology. If point is on the ppf line it"s efficient, if point is inside ppf it"s possible but unefficient, if point is outside ppf it"s not possible.