What do Economists Do?

Economic Models Economists construct models to investigate the way that economic systems work. Economics is concerned with the ways individuals, businesses, & nations choose their limited resources. Economic Models- formulate theories & gather data from the real world.

What Models Show To show a visual representation of consumer, business, or other economic behavior. Econ models all relate to the way individuals, as consumers, & business people react to changes in the world around them.

Cont…… Most common econ model is a line graph. The graph explains how consumers react to changes in the prices of goods & services. Econ models do not record every detail & relationship that exists about a problem to be studied. Model shows only the basic factors needed to analyze the problem at hand.

Creating a Model Begin with ideas about the way things work, then collect facts & discards those that are nor relevant. Find example of teen unemployment. Hypothesis- assumption involving 2 or more variables that must be tested for validity.

Testing a Model Testing a Model or Hypothesis to see if it represents reality. Read Figure 1.5 If model does not turn out, you must make another model to explain the changes.

Applying Models to Real Life Economists might think that cutting taxes might stimulate the econ. Why? Why might this backfire because of people’s fears?

Schools of Economic Thought See Figure 1.6 What do the Democrats think? What do the Republicans think? What does ‘Big Government’ mean?

The End!