THINKING LIKE THE ECONOMIST

ECONOMIC MODEL
In economics often made of diagrams and equations, but model an economist does not include all things in the economy. Economists are also making the assumption by ignoring parts of the economy that have nothing to do, to review the questions. From it can be stated that the economy is to simplify reality to help us understand the issues. In economics there are two models ekonomimyang form of diagrams, namely:


1. ECONOMIC MODEL FLOW CHART SECULAR:
Secular economic model is a flow diagram a visual model of the economy, which shows how the flow of money through markets among households and firms. In this model, the economy has two types of household decision-makers and companies. Firms produce goods and services using a variety of inputs (input), such as labor, land, and capital. While households have a factor of production and consumption of all goods and services in the production company. Households and firms interact in the two types of markets. In the market for goods and services, the household is a buyer and a seller company. While in the market of production factors, households are sellers and firms are buyers.
Secular flow diagram provides a simple way to organize all economic transactions that occur between households and firms in the economy and releasing various parts of this diagram that for some purposes is essential.
Secular flow model more complex and realistic will include, for example, the role of government and international trade. However, these sections are not so important for a basic understanding of how the economy is organized. Because of its simplicity, the flow diagram is useful in secular remember when thinking about how the elements of the economy in the wake together.

2. PRODUCTION POSSIBILITIES FRONTIER MODEL:
Here we consider the simplest model, called the production possibility frontier. Production possibility frontier is a graph which shows the various combinations of outputs that may be in production by the economy, with specific production factors and production technologies are available.
One example of the production possibility frontier can be seen from the economy, if all resources used in the automobile industry, the economy will produce 1000 cars, but no computer. Conversely, if all resources are used for the computer industry, the economy will produce 3000 computers, but no cars. The second endpoint is an extreme possibility of the production possibility frontier. If the economy is dividing its resources between two industries, then the economy can produce 700 cars and 2000 computers. From here a result said to be efficient if the economy can produce a combination of available resources
One of the economic principles that are discussed is that people will face exchange (trade off). Shows a production possibility frontier exchanges in the face of society. Once we have reached a point on the efficient production possibility frontier, it is only by reducing other goods. When the economy moves from point A to C, for example, people produce more computers but at the expense of only producing fewer cars.
Another principle of the ten principles of economics is that the cost is what you sacrifice to get something. It's called opportunity cost (opportunity cost). Production possibility frontier shows opportunitas cost of one item, as a measure of respect of other goods. When people reallocate some factors of production from the car to the computer industry, the economy will move from point A to point C. It means sacrificing 100 cars to get 200 additional computers.
Limit the possibility of simplifying the production of a complex economy to highlight and explain some fundamental ideas. Each time you study economics, this idea will arise repeatedly in various forms. Production possibility frontier provides a simple way of thinking about these ideas.