Thinking Like an Economist

This set of flashcards covers key vocabulary and concepts related to economic thinking and models as discussed in the lecture.

Scientific Method

A systematic process that involves observation, theory, and further observation used by economists to develop and test theories.

Natural Experiments

Real-world occurrences that provide data for economists to analyze effects without the ability to conduct controlled experiments.

Economic Models

Simplified representations of reality, often in the form of diagrams and equations, used to illustrate and analyze economic concepts.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, measured by the slope of the Production Possibilities Frontier.

Microeconomics

The branch of economics that studies individual households and firms, and their interactions in specific markets.

Macroeconomics

The branch of economics that studies economy-wide phenomena such as inflation, unemployment, and economic growth.

Positive Analysis

Descriptive statements about how the world is that can be tested with evidence.

Normative Analysis

Prescriptive statements about how the world ought to be, which involve values as well as facts.

Circular-Flow Diagram

A model that illustrates how dollars flow through markets among households and firms, showing the interactions between them.

Production Possibilities Frontier (PPF)

A graph representing the maximum combinations of goods that can be produced in an economy given its resources and technology.