Chapter 1 Flashcards
Positive economics
Approach that seeks to understand behavior WITHOUT judgments. Describes what exists and how it works. Objective
Normative economics
Approach to economics that analysis outcomes of economic behavior with opinions (good/bad), Subjective. also called policy economics
Description economics
A type of positive economics. compilation of data that describe facts/phenomena.
Economic theory
A type of positive economics, generalizes data and interprets
Variable
Measure that can change from time to time /from observation to observation
Model
Formal, usually mathematical, statement of theory
Ockham’s razor
Irrelevant details should be cut away
Ceteris Paribus
All else equal, “what happens to X, ceteris paribus?” aka if nothing changes
Post hoc, ergo propter hoc
Just because A is before B doesn’t mean A caused B
Fallacy of Composition
Erroneous belief that what’s true for a part is also true for a whole
Empirical Economics
Collection or use of data
In judging economic outcomes, consider…
Efficiency, Equity(fairness), Growth, Stability
Economic growth
increase in total output of economy
Stability
National output is growing steadily, low inflation and full employment of resources
