Chapter 2 Flashcards
What is the role of the economist
Economists play two main roles: as scientists and as policymakers.
explain the role of an economist as a scientist
As scientists, economists develop models to explain economic behavior and predict outcomes. They use these models to analyze data, test hypotheses, and understand economic trends.
explain the role of an econmist as a policymaker
As policymakers, they use their scientific knowledge to advise on economic policy decisions
What is the scientific method
The scientific method involves making observations, forming theories, and testing hypotheses.
How do the economist use the scientific method
Economists use this method to develop economic theories and test their validity. This process includes:
Observations: Noticing patterns and collecting data.
Theories: Developing explanations for observed phenomena.
Testing: Using data and experiments to validate or refute theories.
What is the role of assumptions
Assumptions simplify complex realities to make models manageable and useful.
How do economist use assumptions
Economists use assumptions to build models that abstract from the complexities of the real world. These assumptions are essential for developing clear and testable models.
Example: Assuming that people act rationally in economic models to simplify analysis.
What is positive economics
Describes and explains economic phenomena based on factual evidence. It answers questions about how the world works.
What is normative economics
Involves value judgments about what ought to be. It addresses questions about what should happen based on ethical considerations.
Provide an example of positive and normative economics
A positive economic question might be, “What is the impact of a minimum wage increase on unemployment?” A normative question might be, “Should the government raise the minimum wage?”
What is the role of the economic models in policy
Models help evaluate policy options and predict outcomes.
How do economists use models
Economists use models to analyze the effects of different policies, providing insights into potential consequences and guiding decision-making.
Example: Using a supply and demand model to evaluate the effects of imposing a price ceiling on goods.
What are models
Models are simplified representations of reality.
Why do economists construct models
Economists construct models to focus on specific aspects of the economy. These models use diagrams and mathematical equations to represent economic relationships and predict outcomes.
Example: The supply and demand model illustrates how prices are determined in a market.
What is the circular flow diagram
The Circular-Flow Diagram shows how money flows through the economy.
Description: This model illustrates the interactions between households and firms in two main markets:
The Goods and Services Market: Where firms sell goods and services to households.
The Factors of Production Market: Where households sell labor, capital, and land to firms.
Example: Households provide labor to firms, which in turn produce goods and services that households purchase.
