Transcript Production Possibility Frontier

Wissink
Economics 301- Intro
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About Economics & This Course
So what is this course about?
 (And what is it not about?)
 My working title:
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Advanced Introduction to
Applied
Microeconomic
Theory
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About Economics & This Course

Theory: We will construct models.
– Look at the world and decide what it is we want to
explain or predict
– identify important variables
– state assumptions that govern the model
– make hypotheses
– analyze the model
– use the model to make predictions
– and then see if the model holds up under empirical
scrutiny.
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About Economics & This Course
 Economic(s):
The study of the allocation of
scarce resources to produce commodities
to satisfy infinite human wants.
– Classic definition.
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About Economics & This Course
 MACRO
VS. MICRO
 Micro: Looks at small pieces of the puzzle,
individual markets
–Three basic micro questions:
»What?
»How?
»For Whom?
–How will be decide?
–How will we like the final allocation?
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About Economics & This Course
Macro: the study of the determination of
economic aggregates and how they relate to
each other and how the government and the
exogenous environment affects these aggregates
 Macro examines the factors that determine
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total national output, or total national product
total national income
price levels
unemployment
interest rate levels
the business cycle
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About Economics & This Course

Applied: Where and when we can, we will
apply what we are learning to the real world
economy.
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Introduction: Getting you started, getting you
familiar, getting you acquainted.
 Advanced:
Will use math without apology.
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Why Study Economics?
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Economics is everywhere.
It’s requirement!? Prerequisite!?
To help you understand how economists think and
construct arguments.
To understand how markets and the economy work.
To create a foundation to help you differentiate good from
bad analysis and policy prescriptions.
To get a better understanding of the economics problems
faced by modern societies: domestic and globally.
To better understand the government's and an economy’s
ability to: promote growth, maintain high levels of economic
activity, maintain high levels of employment, maintain
stable prices, and promote improved quality of life.
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On Modeling & Constructing Theories

Simplistic Model Construction
– Ockham’s Razor

Evaluation of Models
– economics is a social science
 Two
pitfalls to avoid:
– the fallacy of composition
– post hoc ergo propter hoc mistakes

Positive vs. Normative analysis
– is
– ought to be
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