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Thinking Like Economist

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Submitted By Romanlazy
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There are _ Roles an _ plays2, Economist
Economist Role #1:As a Scientist
Economist Role #2:As a Policy Advisor
How is an Economist and a Scientist alike?They work together to EXPLAIN the world.
How is an Economist and a Policy Advisor alike?They work together to IMPROVE the world.
What method do both Economists and Scientists use to explain the World?The Scientific Method; through Observation, Theory and more Observation.
What are Assumptions?Statements that help simplify the complex world, making it easier to interpret and understand.
What are Models?Simplified representations Economists use to help understand the complex reality.
The Production Possibilities Frontier and Circular Flow Diagram are:The Main models Economists use to portray and represent the Closed Economy.
The Circular Flow Diagram contains 2 Actors (Decision Makers):1) Households
2) Firms
The Circular Flow Diagram contains 2 Markets:1) Goods and Services
2) Factors of Production
What are the roles of Firms?PRODUCE Goods and Services, Using Inputs: Labour, Land from Natural Resources and Capital such as buildings and machines.
The Inputs that the Firms use from are also called:The Factors of Production, Raw Materials, from Resources
What roles do the Households play?They OWN the Factors of Production, and CONSUME the Goods and Serviced produced by the Firms.
What is "special" about the Households?They have the ability to CONTROL and OWN every single Firm.
What happens in the market for Goods and Services?The Households are BUYERS and the Firms are SELLERS.
In other words, (Goods and Services):Households BUY the Goods and Services that the Firms PRODUCE (Output).
What happens in the market for Factors of Production?The Households are the SELLERS and the Firms are the BUYERS.
In other words, (Factors of Production):Firms BUY

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