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THINKING LIKE AN ECONOMIST - Coggle Diagram
THINKING LIKE AN ECONOMIST
The circular-flow diagram is a visual model of the economy that shows how dollars flow through markets among households & firms
The production possibilities frontier is a graph that shows fundamental eco prob related to our ability to produce goods & services
Efficiency
Tradeoffs
Opportunity cost
Economic growth
Point along the PPF
Choice
Attainable
Movement along the curve
Choice
Opportunity cost
Point outside PPF
Scarcity
Point inside PPF
Waste of resources
Attainable
Fields of economics
Microeconomics
Focuses on the individual parts of the eco
How households & firms make decisions & how they interact in specific markets
Lecturers' wages & oil price
Macroeconomics
Looks at the eco as a whole
Eco-wide phenomena's performance
Inflation, unemployment & eco growth
Positive & normative economics
Positive statement
Attempt to desc the world as it is
'What is'
Deal w desc analysis, factual statements about the world
Obj statement that can be tested, amended @ rejected based on evidence
Fact
Not necessary correct but can be tested, proved & disproved w reference to data & evidence
Fact & case & effect relationship
Right or wrong - test
Normative statement
How the world should be
Prescriptive analysis
Express opinion about what ought to be to achieve a desirable goal
Opinion
Carry value judgment about what ought to be
Not statement of facts
Can't be tested, disproved
Economic system
A set of mechanisms & institutions that resolve the what, how & for whom quest
Eco is concerned w the allocation of scarce resources
Free market
Markets allocate resources
Driven by the profit motive
Limited role for state
Private sector dominates
Mixed economy
Mix of state & private ownership
Government intervention in markets
Mix will vary from country to country
Planned economy
Most resources are state owned
Planning allocates resources
Little role for market prices