CHAPTER TWO –ECONOMIC METHODS AND ECONOMIC QUESTIONS

Question 1

Whats the scientific method?

Answer 1

The scientific method is the ongoing process that economists and other scientists use to (1) develop
models of the world and (2) test those models with data.
Economist do not expect this to represent exactly how the world is, due to the complexity of the world.
However, the believe that models are useful in understanding how the worlds work.

Question 2

Whats empirical evidence?

Answer 2

Empirical evidence is a set of facts established by observation and measurement. (Where empiricism
comes from).When conducting empirical analysis, economists refer to a model’s predictions (that can be
backed with data) as hypotheses.

Question 3

What is causation?

Answer 3

Causation occurs when one thing directly affects another through a cause-and-effect relationship.

Question 4

What is correlation?

Answer 4

Correlation means that there is a mutual relationship between two things

Question 5

Name the three categories of correlation

Answer 5

1. Positive correlation implies that two variables tend to move in the same direction.
2. Negative correlation implies that two variables tend to move in opposite directions.
3. Zero correlation implies that two variables have movements that are not related.