chapter 2 Flashcards
2 role economist play
scientist: explain economic events, impersonal and unbiased
policy advisors: asked to recommend policies to improve economic outcomes, includes personal views and judgements
scientific methods
uses observation and theory, often has problems due to inability to research (no lab experiments)
role of assumption
understanding of impacts, consequences, benefits of decision, determining which variables to use that are most important
positive versus normative statements
positive: descriptive, describe world how is it, testable, describe cause and effect, value free
normative: how world should be, gives opinions, value judgements, not testifiable, not value free
PPF
production possibilities frontier, shows various combinations of outputs an economy can produce
factors of curved PPF
closer to top, slope low, opportunity cost is low, lose to bottom, slope is steep, opportunity cost is high
shifts in PPF
economic growth shifts graph outwards, change in one variable may stretch one aspect of line while other remains constnant
what is the slope of a PPF
opportunity cost (rise/run)
efficient, inefficient, and non feasible (PPF)
efficient: points on the curve
inefficient: point inside PPF
non feasible: points outside PPF
straight versus bowed line of PPF
straight: constant opportunity cost
bowed: increasing opportunity cost
what are the assumptions of a PPF graph
only two goods are produced, fixed amount of resourced, fixed amount of quality of technology
why policy advisors disagree
validity of alternative positive theories, different normative views
why scientists disagree
disagree about direction truth lies, government involvement in market, government involvement in taxes
