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【精选】02_Think Like an Economist_MV
THE ECONOMIST AS A SCIENTIST
The economic way of thinking . . .
Involves thinking analytically and
objectively.
Makes use of the scientific method.
Develops theories, collects and analyzes data to
evaluate the theories.
Uses abstract models to help explain how a
complex, real world operates.
The Role of Assumptions
• In constructing a model, we focus on some
factors and ignore some others. This is called
making assumptions.
• Why do we need assumptions?
• make the model simpler and more manageable
• make the essential factors more visible
• The art in scientific thinking is deciding
which assumptions to make.
• Economists use different assumptions to answer
different questions.
Economic Models
• Economists use models to simplify reality in
order to improve our understanding of the
world.
• Two of the most basic economic models are:
• The Circular Flow Diagram
• The Production Possibilities Frontier
Our First Model: The Circular-Flow
Diagram
The circular-flow diagram (循环流量图) is a
visual model of the economy that shows how
dollars flow through markets among households
and firms.
Figure 1 The Circular Flow
MARKETS
Revenue FOR Spending
GOODS AND SERVICES
•Firms sell
Goods Goods and
and services •Households buy services
sold bought
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