Chapter 2 Econ 130
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Economic models
can be useful, even if they are not particularly realistic
In the circular-flow diagram
households are sellers in the markets for the factors of production
Microeconomics is best described as the study of
how households and firms make decisions and how they interact in specific markets
Factors of production are
inputs into the production process
"Prices rise when the quantity of money rises rapidly" is an example of
positive economic statement
For economist, statements about the world are of two types:
positive statements and normative statements
When economist make normative statements, they are
speaking as policy advisors
A production possibilities frontier shifts outward when
the economy experiences economic growth
