Download What do Economists Do?

What do Economists Do?
Economic Models
• Economists construct models to
investigate the way that economic systems
work.
• Economics is concerned with the ways
individuals, businesses, & nations choose
their limited resources.
• Economic Models- formulate theories &
gather data from the real world.
What Models Show
• To show a visual representation of
consumer, business, or other economic
behavior.
• Econ models all relate to the way
individuals, as consumers, & business
people react to changes in the world
around them.
Cont……
• Most common econ model is a line graph.
• The graph explains how consumers react to
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changes in the prices of goods & services.
Econ models do not record every detail &
relationship that exists about a problem to be
studied.
Model shows only the basic factors needed to
analyze the problem at hand.
Creating a Model
• Begin with ideas about the way things
work, then collect facts & discards those
that are nor relevant.
• Find example of teen unemployment.
• Hypothesis- assumption involving 2 or
more variables that must be tested for
validity.
Testing a Model
• Testing a Model or Hypothesis to see if it
represents reality.
• Read Figure 1.5
• If model does not turn out, you must make
another model to explain the changes.
Applying Models to Real Life
• Economists might think that cutting taxes
might stimulate the econ. Why?
• Why might this backfire because of
people’s fears?
Schools of Economic Thought
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See Figure 1.6
What do the Democrats think?
What do the Republicans think?
What does ‘Big Government’ mean?
The End!