CAS EC 101 Chapter 2: Chapter 2: Thinking Like an Economist

• School: Boston University
• Department: Economics
• Course: CAS EC 101
• Professor: Todd Idson

Document Summary

To test theory, collect and analyze data. In economics conducting experiments are not impractical. Instead pay close attention to natural experiments of history. Economists make assumptions to simplify the complex world. Can make the assumption that prices are completely fixed (short run effects of policy) but prices are flexible (for long run effects of the policy) Economists use different assumptions when studying short and long run effects of a change in quantity of money. Economists get rid of detail to see what is really important. Definition: graph that shows various combinations of output. Economy can produce given the available factors of production and the available production technology that firms use to turn these factors into output. 2 extremes: making only computers or only cars- or divide resources to be able to make both. With the amount of resources, economy can make at any point on or inside the production possibilities frontier, but no at points outside the frontier.