ECON 1 Chapter Notes - Chapter 1: East Los Angeles College, Ceteris Paribus, Deflation
Document Summary
Complementary goals: low unemployment and high economic growth. Conflicting goals: low unemployment and low inflation. Relationship between opportunity cost and rational self-interest. Economic theory in practice, economic theory in models. Best models are the ones that keep things simple. Occam"s razor: eliminate complicating details that don"t significantly contribute to the model. You can"t generalize to the aggregate based on the expected behavior of a single person. Positive economics: explains what will happen under certain conditions. Standard of living may be measured in different ways: by comparing personal incomes, by comparing the total market value of a nation"s production. A country"s standard of living depends on its ability to produce goods and services: almost all variations in living standards are explained by differences in countries" productivities. Productivity: is the amount of goods and services produced per unit of labor. Higher productivity insures a better standard of living. Is the most important determinant of standard of living.
