Testing Predictions Economists such as milton friedman argue that all theories require unrealistic assumptions The theory is only useful if it can be used to predict real-world events Even if firms state they don't maximize profits, if their behavior can be predicted by using this assumption, the theory is useful Chapter 1
Chapter 1 30 Testing Predictions Economists, such as Milton Friedman argue that all theories require unrealistic assumptions The theory is only useful if it can be used to predict real-world events Even if firms state they don’t maximize profits, if their behavior can be predicted by using this assumption, the theory is useful
Chapter one includes: 1.1 Defining Microeconomics 1.2 Economic Theories and Models 1.3 Basic Demand-Supply Model a1,4 The Mathematics of Optimization Chapter 1 31
Chapter 1 31 Chapter one includes: 1.1 Defining Microeconomics 1.2 Economic Theories and Models 1.3 Basic Demand-Supply Model 1.4 The Mathematics of Optimization
A Popular Economic Adage Even your parrot can become an economist-just teach it to say ' supply and demand Chapter 1 32
Chapter 1 32 A Popular Economic Adage “Even your parrot can become an economist —just teach it to say ‘supply and demand.’
1.3 The Basic Supply-Demand Model The supply-Demand Model a model describing how a good's price is determined by the behavior of the individual's who buy the good and the firms that sell it Economists argue that market behavior can generally be explained by this model that captures the relationship between consumers'preferences and firms'costs. Chapter 1 33
Chapter 1 33 1.3 The Basic Supply-Demand Model The Supply-Demand Model A model describing how a good’s price is determined by the behavior of the individual’s who buy the good and the firms that sell it. Economists argue that market behavior can generally be explained by this model that captures the relationship between consumers’ preferences and firms’ costs
Basic Assumptions(基本假设) about the supply-Demand Model ■ Rational Behavior assumption(理 性行为假设) Each person tries to choose the best alternative available to him or her Scarce resource assumption(资源 稀缺性假设) Chapter 1 34
Chapter 1 34 Basic Assumptions(基本假设) about the Supply-Demand Model Rational Behavior Assumption（理 性行为假设） Each person tries to choose the best alternative available to him or her Scarce Resource Assumption（资源 稀缺性假设）