Economics Lesson: Positive vs. Normative Economics and International Trade - Prof. C. Rous, Study notes of Economics

Download Economics Lesson: Positive vs. Normative Economics and International Trade - Prof. C. Rous and more Study notes Economics in PDF only on Docsity! TODAY’S MENU: Wednesday 26 January 2011 I. BUSINESS A. Practice Problems (answers on Moodle) 1. Chapter 2: 1, 2, 4-8, 10 II. SUBSTANCE A. Positive vs. normative economics  Positive economics describes how the world works; how an economy works; its desciptible and TESTABLE  Normative economics expression of values and expression of opinion  ex good vs bad; beauty vs Ugly 1. It’s asunny day a. Positive 2. It’s a nice sunny day a. Normative B. Note on graphing: Appendix to Chapter 2  Graphing is a picture of a relationship (der) C. Opportunity Cost Application: International Trade 1. Questions to Answer a. If “workers in the United States are the most productive in the world,” why do we consume so many imported goods? b. If “trade can make everyone better off,” why is there so much opposition to it? -no matter what someone will get the short end of the stick; Some will be better off and some will be worse off 2. Tool: Production Possibilities Frontier (PPF)- describes the limit or boundry that we can produce something in a given time a. Efficiency- getting the most out of the materials - inorder to produce one thing we have to give up something else - Contrast inefficiency- a company produces one thing and doesn’t have to give up anything to produce another b. Numerical Slope = Opportunity Cost- c. Optimal Point?- d. Economic growth D. How Trade Can Benefit All: An example 1. Assumptions a. Two Countries: England, Portugal