Thinking Like an Economist

OUR FIRST MODEL: THE CIRCULAR FLOW DIAGRAM The economy consists of miltions of people engaged in many activities-buying, selling, working, hiring, manufacturing, and so on. To understand how the economy works, we must find some way to simplify our thinking about all...
Thinking Like an Economist

ECONOMIC MODELS High school biology teachers teach basic anatomy with plastic replicas of the human body. These models have all the major organs the heart the liver, the kidneys, and so on. The models allow teachers to show their students in a simple way how the...
Thinking Like an Economist

THE ROLE OF ASSUMPTIONS If you ask a physicist how long it would take for a marbie to fall from the top of a ten story building, she will answer the question by assuming that the marble falls in a vacuum. Of course, this assumption is false. In fact, the building is...
Thinking Like an Economist

THE SCIENTIFIC METHOD: OBSERVATION, THEORY, AND MORE OBSERVATION Isaac Newton, the famous 17th-century scientist and mathematician, allegedly became intrigued one day when he saw an apple fall from a tree. This observation motivated Newton to develop a theory of...
Thinking Like an Economist

THE ECONOMIST AS SCIENTIST Economists try to address their subject with a scientist’s objectivity. They approach the study of the economy in much the same way as a physicist approaches the study of matter and a biologist approaches the study of life They devise...
Thinking Like an Economist

Thinking Like an Economist Every field of study has its own language and its own way of thinking. Mathematicians talk about axioms, integrals, and vector spaces. Psychologists talk about ego, id, and cognitive dissonance. Lawyers talk about venue, torts, and...