1. Economists Toolbox Unit 1.4

2. Data Economics, the study of how the economy works and how people behave within that economy, requires data, lots of data. In order to interpret this data, to make meaning of it, we use a variety of ‘tools’. – Statistics – Charts and tables – Models

3. Macro v Micro Microeconomics – Prices, costs, profits, competition, behavior of consumers and producers Macroeconomics – Employment, Inflation, money, trade, government actions, banking

4. Positive vs. Normative Economics, and why Economists Disagree Positive Economics – Based on fact I.e. The economy added 240,000 jobs last month. Normative Economics – Opinion (What should be done) I.e. We should spend more on education. Why Economists Disagree – Most economists agree on most issues – Disagreements come from interpretation of facts and what is and is not a causal factor. I.e. Economists disagree on the effects of taxation, and how taxation should be applied to get the best performance out of the economy.

5. Adam Smith Adam Smith is perhaps the world’s first economist, in large part because the field did not exist until he introduced his highly acclaimed “An Inquiry into the Nature and Causes of the Wealth of Nations” Smith was convinced that the mode of trade of the day, Mercantilism, where most of the trade was controlled by the Crown, was inefficient, and that “Free Trade” would produce more trade and more wealth. The mechanism that Adam Smith proposed would bring about more wealth was “The Invisible Hand” of the market The Invisible Hand that Adam Smith describes is the combined decisions of buyers and sellers, and this will motivate producers to make products people want.