ECON 0100 Chapter Notes - Chapter 2: Opportunity Cost, Minuscule 22
Document Summary
Section 1 the economist as scientist. 2-1a the scientific method: observation, theory, and more observation. It is difficult to conduct experiments in economics: pay close attention to the natural experiments offered by history. Assumptions can simplify the complex world and make it easier to understand: ex: Using models to learn about the world that consist of diagrams and equations. Omit many details to allow us to see what is truly important. 2-1d our first model: the circular-flow diagram. We need a model that explains how the economy is organized and how participants in the economy interact with one another. Circular-flow diagram: a visual model of the economy that shows how dollars" flow through markets among households and firms: two types of decision makers. Firms: produce goods and services using inputs (land, labor, and capital. Factors of production: land, labor and capital.
