ECON 101 Chapter Notes - Chapter 2: Normative Economics

• School: UBC
• Department: Economics
• Course: ECON 101
• Professor: Ratna Shrestha

Document Summary

Economist as a scientist: try to explain the world. Addressing subject with scientist objectivity: scientific method: dispassionate development & testing of theories, devise theories, collect data, analyze data to verify/refute theory. Role of assumptions: assumptions can simplify the complex world easy to understand, e. g. effects of international trade: 2 countries produce 2 goods. Circular-flow diagram: visual model of organization of economy (flow of dollars, two decision makers (households & firms, 2 types of market, markets for factors of production, market for goods & services. Production possibilities frontier: t u p n = in tio c u d o r f p s o r o t c a. F t u tp u s = o e vic r e s & s d o o. G: shows max output possibilities that the economy can possibly produce given available factors of production & available production technology, outcome is efficient it economy is getting all it can from scarce resources.