ECON-200 Chapter Notes - Chapter 2: Congressional Budget Office, Opportunity Cost, Capital Good
Document Summary
The role of assumptions in model building. Micro: the study of how households and firms make decisions and how they interact in specific markets. Macro: the study of economy wide phenomena. Normative statements: opinions on the way things should be (ethical judgments). Positive statements: opinions on the way things are (scientific judgments). The ppf shows the various combinations of output that the economy can possibly produce given the available factors of production and the available production technology firms have, and assuming that the economy is operating as efficiently as possible. Assume the economy can produce some combination of (1) fish and (2) agricultural products. Factors of production: things used in the production process. Note that objects used in the production process, such as boats, farming tools, and machines, are also referred to as. However, people are an example of a factor of production that is not a capital good. Production technology: method of fishing or farming.
