Economists' tool kit

Question 1

Economics as a social science:

Answer 1

Emphasis on opportunity cost, assumptions of maximization of self-interest and the analysis of choices.

Question 2

Scientific method:

Answer 2

Systematic set of procedures through which knowledge is created. Hypotheses are suggested and then tested. Hypothesis is assertion of a relationship between two or more variables that could be proven to be false.

Question 3

Models in economics:

Answer 3

Model is a set of simplifying assumptions about some aspect of the real world. Based on assumed conditions that are simpler. Use graphs to represent economic models.

Question 4

Testing hypotheses in economics:

Answer 4

All-other-things-unchanged problem: Ceteris paribus is a Latin phrase that means “all other things unchanged”.
The fallacy of false cause.

Question 5

Normative statement:

Answer 5

One that makes a value judgment and based on the values of the person who makes them. Provokes disagreements.

Question 6

Positive statements:

Answer 6

Statement of fact or a hypothesis. Disagreements can be resolved through investigation.

Question 7

Microeconomics:

Answer 7

Branch of economics focuses on the choices made by decision-making units in the company.

Question 8

Macroeconomics:

Answer 8

Branch of economics that focuses on the impact of choices on the total, or aggregate level of economic activity.