ECO 1104 Chapter 2: Chapter 2-Think Like an Economist

• School: University of Ottawa
• Department: Economics
• Course: ECO 1104
• Professor: Rebekah Owusu

Document Summary

Just like any other science course, economics uses the scientific method to create and test theories and analyse data. They must make due with the data and information that the world gives them. Economists pay close attention to natural experiments offered by history. War interrupts distribution of oil, prices skyrocket. History episodes are valuable to economists because they produce data about the economy and how it interacts in these situations. Assumptions simplify the world and makes it easier to understand. When studying international trade, we can assume the world consists of 2 countries, ours and theirs. This simplifies the study so we can better understand the relationship. Art of scientific thinking - deciding which assumptions to make. There can be different assumptions made for different questions. Diagrams used by economists to simplify and understand the economy. Does not include every feature of the economy. The circular flow diagram offers a simple analysis on how the world economy works.