Economic excercise I

CHAPTER 2  Thinking like an economist

   Economist try to address their subject with a scientist`s objectivity.they approach the study  of the economy in much the some say as a physicist approaches the study of matter andabiologist approaches  the studt of file. They devise theories,collectdata,and them analyze these data in an attempt to verify or refute their theories.

   To beginners, it can seem odd to claim  thateconomicsis a science.After all,oconomists do not work with test tubes or telescopes.The essence of science,however is the scientific method-the dispassionate development  and testing of theories about how the word works. This  method of iquary is as applicable to studying a nation`s economy as it is to studying the earth`s gravty or a  species` evalution.As Albert Einstein once put it, “thewhole of scienceis nothing more that the refinement of everyday thinking”.

       Altough Einstein`s comment is as true for social  sciences such as economics as it is for natural sciences such as physic,most people are not accustomed to looking at society   through the e eyes of a scientist.let`s discuss some of the ways in  wich economists apply the logic of science exemine how an economy works.

CHAPTER 3              Iteredependence and gains from trade

A PARABLE FOR THE MODERN ECONOMY

     To understand why people choose to depen orn others for goods and services and how the choice  improves their lives,let`s look at a simple economy .imagine that there are to goods in the word:mead and potatoes.and there are two people in the word-a cattle rancher and a potato farmer-each of whom like to eat  both mead and potatoes.

      The gains from trade are most  obvious  if the ranher can produce only meat and  the farmer can  produceonly potatoaes.in one scenario,the ranher and the farmer could choose to have nothing to do with each other.but  after several  months of eating beef roasted ,boiled,broiled, and grilled  the rancher  might decide that self-sufficiency is not all it`s cracked up to be .the farmer ,who has been eating  potatoes mashed,fried,baked, and scalloped,would likely  agree. It is easy to see that tade would allow them to enjoy grater variety:each could them have a steak with a baked potato or a burger with fries.

       Although this scence illustrates most simply how everyone can benefit from trade ,the gains would be  similar if the rancher and the farmer ware each capable of producing the other good,but only a great cost.suppose,for example ,that the potato farmeris able to raise cattle and produce meat, but that  he is not very well suited for it . in this case ,it is easymthe other.