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| The Production Possibility Frontier |
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| A formal statement of a theory, usually a mathematical statement of a presumed relationship between two or more variables. A simplified version of the world used to make predictions or test relationships. |
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| the best alternative that we forgo when we make a decision |
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| how agents (people, firms, countries) use scarce resources to satisfy unlimited wants |
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looks at the actual act of making a decision - looking at why agents do things
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| looks at the larger effect of millions of individual decisions that are made (inflation, unemployment, interest rates) |
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| the structure and performance of industries and firms within an economy |
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| deals with the factors that determine wage rates, employment and unemployment |
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| examines the role of the government in the economy (What are the economic functions of government? What effects do these have on the economy?) |
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| studies the trade flows among countries and international financial institutions (What are the implications of tariffs or quotas?) |
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| looks at the flow of assets and money between nations as well as what determines the exchange rate between nations |
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| urban & regional economics |
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| studies the spatial arrangement of economic activity (Why do we have cities? Why do certain neighborhoods decline while others prosper?) |
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| comparative economic systems |
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| examines the different ways that alternative economic systems function. (What are the advantages and disadvantages of different systems? How do capitalist economies differ from socialist economies?) |
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| focuses on the problems of poor or developing counties (what can be done to promote development in these counrties? How do countries grow?) |
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| uses statistics to test hypotheses and theory |
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| traces the development of the modern economy (What caused the industrial revolution, the great depression, postwar growth, etc) |
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| analyzes the economic functioon of legal rules and institutions (how does the law change the behavior of businesses? What are the economic costs of crime?) |
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| positive economic statement |
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Definition
-assertion about economic reality
- supported or rejected by evidence
- true or false
-'what is' |
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| normative economic statement |
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- opinion
- 'what should be' |
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| people often make the mistake of thinking that what is true or best for one person is necessarily true for all |
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Definition
the main interaction is between Households & Firms
- There is a flow of resources, products, income, and revenue |
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| A measure that can change from time to time or from observation to observation. |
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