How Do Economists Study Human Behavior?
•Economics as a Science
–The scientific method
•Observation→Theory→Data→Testing
–Rational Behavior
•Weighing benefits and costs and maximizing total net benefits
•Marginal vs. Total Thinking
–Economic Theory and Models
•Simplification by assumption
•Ceteris Paribus – Holding other factors constant
•Prediction vs. realism
–Microeconomic versus Macroeconomics