Chapter 2 : Thinking Like an Economist

1. How does the use of a very simplified model of the economy such as those found in a production possibilities frontier help you to understand the economy? Did you find it useful?

A simplified model of the economy like the ones found in a production possibilities frontier help individuals understand the economy by allowing assumptions of simplified scenarios so that we can learn the reality of the situation. Instead of adding multiple variables that may cause different scenarios, making assumptions that only specific variables apply, makes the situation more simple to understand. It is like eliminating numbers from a simple math equation like 1+1. Instead of the idea of the numbers there, we would try to understand the idea of combining the two numbers before bringing in the variables. Although some of these things seem radical, like assuming an economy sells only two products, it makes sense to show the root of the problem to better understand its principle so that it can be applied to larger problems.

1. Give an example of something you believed or heard frequently about the economy before reading this chapter.  Did your belief/the comments lead to positive or normative statements? Why? And why does it matter? An example of this that is in the news a lot is international  trade – we hear it talked about in terms of winners and losers, but when you make a trade with your local grocery store you both win.  In fact, trades don’t occur unless both the buyer and the seller “win”. For other economic “myths” just google “economic myths”. 

Two very frequent things that are said about the economy are, “the minimum wage is too low” or “genders should be paid equally.” When responding to these type of questions it really depends on who I am specifically answering to. If I have to be descriptive or I am talking to an individual that I am trying to persuade, I usually avoid normative statements. Most of the time my belief or comment leads to a normative statement though. The reason why I do this is because I feel like after responding to someone with a normative statement, it opens up the conversation to a better debate.