Thinking Like An Economist PDF

**THINKING LIKE AN ECONOMIST** CHAPTER 2 **Economics trains you to \....** \> Think in terms of alternatives. \> Evaluate the cost of individual and \> social choices. \> Examine and understand how certain \> events and issues are related. **The Economic Way of Thinking** \> Includes develo...

**THINKING LIKE AN ECONOMIST** CHAPTER 2 **Economics trains you to \....** \> Think in terms of alternatives. \> Evaluate the cost of individual and \> social choices. \> Examine and understand how certain \> events and issues are related. **The Economic Way of Thinking** \> Includes developing abstract models from theories and the analysis of the models. \> Uses two approaches: **Descriptive** (reporting facts, etc.) **Analytica**l (abstract reasoning) **Two Roles of Economists** \> When they are trying to explain the world, they are scientists. \> When they are trying to change the world, they are policymakers. **The Economist as a Scientist** The economic way of thinking... \> Involves thinking analytically and objectively. \> Makes use of the scientific method. **The Scientific Method** \> Develops theories, collects, and analyzes data to prove the theories. \> Uses abstract models to help explain how a complex, real world operates. **Observation, Theory and More Observation!** **Economic Models** \> Economists use models to simplify reality in order to improve our understanding of the world \> Two of the most basic economic models include: **\>The Circular Flow Model** **\>The Production Possibilities Frontier** **The Circular-Flow Model** The **circular-flow model** is a simple way to visually show the economic transactions that occur between households and firms in the economy. IMG\_256