Economist 2
Copyright 2004 South-Western/Thomson Learning
Thinking Like an Economist
Every field of study has its own terminology
Mathematics
integrals axioms vector spaces
Economics
supply opportunity cost elasticity consumer
surplus demand comparative advantage
deadweight loss
3,000 D
C
2,200
2,000 A
Production
possibilities
frontier
1,000 B
4,000
3,000
2,100 E
2,000
A
?
NORMATIVE
?
from tobacco companies the costs of treating
smoking-related illnesses among the poor.
NORMATIVE
Copyright 2004 South-Western/Thomson Learning
Summary
Economists try to address their subjects with a
scientists objectivity.
They make appropriate assumptions and build
simplified models in order to understand the world
around them.
Two simple economic models are the circular-flow
diagram and the production possibilities frontier.