ECON-UA 1 Chapter Notes - Chapter 2: Scientific Method, Opportunity Cost
6 Jul 2020
School
Department
Course
Professor
Document Summary
Claims that attempt to describe the world as it is. Can be confirmed or refuted - testable. If you jump off cliff, you break your leg. Claims that attempt to prescribe how the world should be. Cannot be confirmed or refuted - opinion statements. No one should jump off the cliff. Simplify the complex world and make it easier to understand. Studying short-run effects, we assume prices do not change much. Studying long-run effects, we assume prices are flexible. Highly simplified representation of a more complicated reality. All economic models are built with assumptions. May omit details to allow us to see what is truly important. Visual model of the economy showing how dollars flow through markets among households and firms. Resource the economy uses to produce good and services. In the markets for fop, households are sellers and firms are buyers. Own fop, sell/rent them to firms for income. Buy/hire fop and use them to produce goods and services.
