Economic%20Methods

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Economic Methods

• Chapter 1

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Economics is about scarcity

• Need to economize because of limited resources
  and unlimited wants.

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RESOURCES are the Factors of Production

• Land
• Labor
• Capital

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NOTE

• Entrepreneurs are considered (in this book) to be
  a particular type of human resource.

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NOTE

• Technology and information are part of the
  capital resource.
• Financial capital is NOT a real resource.

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Scientific Method in Economics

• Observe an Event
• Devise a hypothesis
• Test the hypothesis
• Tentatively accept, revise, or reject the
  hypothesis.

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Economic Reasoning

• Apply the theoretical and factual tools of
  economic analysis to explain economic
  developments or solve economic problems.

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Economic Reasoning

• Value judgments must be taken into consideration.
• Free goods do not have a direct cost.
• Economic goods are not free.
• Economic reasoning is similar to critical
  thinking.

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What are the factual tools of Economics

• Statistics
• History
• Institutions

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Theoretical Tools in Economics

• Economic Concepts
• Economic Models
• May be in form of words, graphs, or equations.

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What Are the Uses of Graphs?

• Pie Charts

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What are the use of graphs?

• Line Graphs

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What are the use of graphs?

• Time series

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What are the use of graphs?

• Column charts

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What are the use of graphs?

• Bar charts

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What are the use of graphs?

• Area charts

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Analytical Diagrams

• Economic diagrams illustrate how two variables
  relate to each other.
• Direct relationships
• Inverse relationships