Economists
• Scientists : make positive statement that try to describe and explain the way as it is.
• Policy advisors : make normative statements that try prescribe how thing should be , to
improve it ( should , needed)
The Circular flow Diagram
• Markets for good & Services
• Markets for Factors of production
1. Household
2. Firm
THE Production Possibilities frontier
• Assume the two goods and assume one resource is used to produce each of the goods (
labours
Efficient: All resources are fully Utilized
Not Efficient: underutilized ( which cost unemployed)
Slope : rise /run
When we have a bowl curve: opportunity cost is low when at the high point and opportunity
cost is high when at low point
Absolute Advantage : is the ability to produce a good using fewer inputs than another product
Comparative advantage: is the ability ti produce a good at a lower opportunity cost than
another produce
Competitive market: is one with many buyers and sellers, each has a negligible effect on price
