1-10-12

1. 1-10-12 Give me two examples of trade-offs you made yesterday.

2. What do Economists do? Chapter 1 Section 3

3. Section 3 – What do Economists do? Microeconomics – the branch of economic theory that deals with behavior and decision making by smallunits such as individuals and firms. Macroeconomics – branch of economic theory dealing with the economy as a whole and decision making by large units such as governments.

4. Economic models To economists, the word economy means: All the activity in a nation that together affects the production, distribution, and use of goods and services. Economists often formulate theories and gather data when studying a specific part of the economy. Things like rising teenage unemployment, falling interest rates, etc. These theories are called economic models: a theory or simplified representation that helps explain and predict economic behavior in the real world.

5. Economic models cont…. Economists use models to understand in simple terms the complex workings of the world. These models show visual representations of consumer, business, or other economic behaviors. An example of a economic model is the production possibility curve we talked about in section 2. Its purpose was to reveal opportunity costs. When creating economic models, economists assume that some variables will remain constant in order to determine the effects of the changes in the non-constant variables.

6. Models Hypothesis – an educated guess or prediction. Used by economists to test their theories. Testing a Model can be done by collecting data and comparing it to the hypothesis. If the data proves the hypothesis the economist will have to develop another hypothesis to explain the data.

7. Schools of economic thought • Economists deal with facts but their opinions and beliefs may influence how they view those facts and fit them into theories. • Factors that may help create an economists opinions can range from: • political party alignment • education levels • to schools attended • etc.

8. Values and economics Values are the beliefs or characteristics that a person or group considers important, such as religious freedom, equal opportunity, individual initiative, freedom from want, and so on. Judgments about results of studies depend on a person’s values. Economists can only try to inform us about the likely short-term and long-term outcomes of policies.

9. Mini debate We will be discussing whether or not the government should be spending more money on education, even if it requires raising taxes.