1 Some more intro material Here we have some more basic concepts that we see in the study of economics

2 Economics is a science - really! In economics, like other scientific fields, models are used to predict and explain activity or actions. A model is judged to be useful by how well it predicts and explains these actions. The better the predictions and explanations, the better the model.

3 Positive and normative economics What is the difference in the following two statements? 1) Raising the minimum wage will not change the unemployment rate at all. 2) I think we should raise the minimum wage. To me both of these statements sound like my opinion. BUT, the first may, or may not, be right. It is a statement that can be put to the test. If economics were like chemistry you could conduct an experiment to see if the statement is true. (In fact, statistical tools help economics be like chemistry.)

4 Positive and normative economics Statements like 1) above that can be put to the test are POSITIVE economic statements. Much of the work in science is formulating and testing positive statements. Statement 2) above is a statement about what someone thinks SHOULD BE. We call it a normative economic statement.

5 Microeconomic topics Economics has two main branches of study: micro and macro. Micro topics include (ECO 203 is a micro course) 1) How markets work - we are concerned about how the price of a product and how much of the product is sold changes due to changing conditions in the world. 2) We focus on the decisions individual people and firms make. 3) From time to time we will ask questions about what role the government should play and what impact that role will have on a market.

6 Macroeconomic topics Some macro topics (ECO 202 is a macro course) 1) How the national economy works - we are concerned about things like inflation, unemployment, international trade and economic growth. 2) We will ask what role the government plays in the economy and explore what impact that role has on the economic system. 3) We will want to understand how changes in variables such as the interest rate affect our lives in the roles we play in households, firms, and governments.