1. Chapter 2

2. Why use an Economic model? Economists use economic models to understand much more better. Economic models are the “skeleton” of Data, showing everything into a single model.

3. Positive/Normative statement The example of this would be, saying a price of an item will drop, and also saying since the price will drop, firms should stop manufacturing this certain good. -Positive Statement defines how the current world is. For example, stating the current market price for a certain item is a positive statement; it clearly states how much the price is. -Normative Statement defines how the world should be in the person’s point of view

4. Microeconomics Microeconomics is the study of economics in a more sophisticated, detailed picture; seeing how a number of household or firms manage their scarce resources. To put it in another words, “when looking at the forest, looking at a each tree specifically is Microeconomics.”

5. Circular Flow Click on the video: If the video does not work, click herehere

6. Production Possibilities Frontier Possibility Frontier is how firms use their given scarce resources, to their maximum efficiency.