The Tools of Economics

Factual Tools Statistics History How institutions operate Statistics –data and figures economists use in measurements prices, unemployment, production can refer to methods used to study data –finding an average

History Must know history to understand the present For example the history of energy consumption, production and prices

How institutions operate Organizations, customs, or patterns of behavior in an organization that affect the economy –examples: banking, labor unions, ownership of private property How do they operate ? Private property has allowed some to harm the public welfare (air pollution) - so we have developed ways to regulate this institution

Theoretical tools Economic Concepts Economic Models Variables

Economic Concepts Words or phrases that convey a specific meaning in economics For example: the concept of scarcity

Economic Models Simplified representations of the real world For example a model of a greenhouse could show the effects of global warming Variables –a quantity whose value changes in relationship to changes in the values of other related items –Example ?