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ECNS 309 > TEST 1 + Final > Flashcards

TEST 1 + Final Flashcards

1
Q

What does the derivative of a function represent?

A

slope of the tangent line to f(x) at specific point

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2
Q

Covariance is?

A

comovement between two variables

measures wheter they change is similar or opposite directions

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3
Q

p-value

A

describes the probability that in another similiar experiment you would observe the same outcome given H0 is true

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4
Q

descibe instrumental variable approach

A

when you have a seperate variable thats associated w/ the independent variables but not associated w/ dependent variable

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5
Q

Regression Dicontinuity approach

A

approach that uses a distinct cutoff to compare otherwise similar groups to identify causal effect of treatment/intervention

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6
Q

natural experiment difference in differences approach

A

approach studies differential effect of a treatment on a “treatment group” and a “control group”

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7
Q

what is omitted variable bias?

A

occurs when significant independent/explanatory variables of the dependent variable are not included in the model

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8
Q

2 different types of omitted variable bias

A
  1. independent variables that are uncorrelated with our already included independent variables (effects error term)
  2. independent variables that are correlated with our already included independent variables

(beta hat will be biased)

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9
Q

3 main categories of risk preference

A
  1. risk loving
  2. risk neutral
  3. risk adverse
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10
Q

breif overview of the planet money podcast, What Causes What

A

focuses on the distinction between correlation and causation

talks about real life examples life schooling, crime, and health

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11
Q

log-level model

A

estimates a constant percentage change relationship between y & x

log-level model might be good when we have a non-linear relationship between the dependent variable and the independent variables

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12
Q

Constant Relative Risk Aversion(CRRA)

what is value of w for each risk preference?

A

0 < w <= 1 (risk adverse)

w=0 (risk neutral)

-1 <= w < 0 (risk loving)

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13
Q

TR maximization

what is value of ED (elasticity of demand) when TR is maximized?

A

ED= -1

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14
Q

basically what is the approach for calculating comparitive statics ?

A

calculate EP*,x and EQ*,x

wrt some variable x that will be named, like the price of the other good

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15
Q

formula for Arrow Pratt measure of risk aversion?

r(I)=

A

r(I)= - U’’(I) / U’(I)

*the larger the number, the more risk adverse an individual or consumer group is relative to a group with a lower Arrow-Pratt risk aversion measure

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16
Q

What does the Arrow Pratt Measure of Risk Aversion tell us ?

A

consumers or companies risk preferences relative to eachother –> the larger the number, the more risk adverse an individual or consumer group is relative to a group with a lower Arrow-Pratt risk measure

17
Q

what is the value based approach?

A

choose inputs that maximize outputs/revenues given a set of cost constraints

18
Q

what is the cost based approach?

A

maximize profit by minimizing cost

19
Q

do the value based and cost based approach yield different profit maximizing conditons?

A

no

20
Q

what will HOD =

if there are constant returns to scale?

A

HOD=1

*if HOD=5, production will increase by 5 units for every unit of input

21
Q

income elasticity of demand

what are the elasticity values for inferior,normal, and luxury goods

A

inferior goods: Eq,i < 0 as i increases,QD decreases

normal goods: Eq,i > 0 as i increases, QD increases

luxury goods: Eq,i > 1 as i increases, QD increases at a higher rate

22
Q

cross price elasticity of demand

what are the elasticity values of goods that are complements, unrelated, and substitutes ?

A

Complements: EQc,Pk < 0 as Pk increases, QD decreases

unrelated: EQc,Pk = 0 as Pk increases, no change in Qc

substitutes: EQc,Pk > 0 as Pk increases, Qc increases

23
Q

true or false

in certain portions of the classic production function, it is possible for quanity produced to decrease as additional inputs are needed

A

true

think… w/ too many people working, output could be decreased

24
Q

market case

under market case, producers objective is to maximize profits, what is the condition at which this objective is satisfied?

A

slope of π = slope of PPF

or

MRPT= - P2 / P1

mathmatically:

max π = P1Q1 + P2Q2

s.t. Q1 = f(Q2) - PPF

25
Q

elasticity curve scenarios

should you increase or decrease price to increase revenue while:

  1. operating on inelastic portion of demand curve
  2. operating on elastic portion of demand curve
A

inelastic portion of demand curve: increase price to increase revenue

elastic portion of demand curve: decrease price to increase revenue

26
Q

elasticity values

define values for:

  1. perfect inelastic
  2. inelastic
  3. perfectly elastic
  4. elastic
A

perfect inelastic: |ED| = 0

inelastic: 0 < |ED| < 1

perfectly elastic: |ED| = 1

elastic: 1 < |ED|

27
Q

exponential demand functions

for exponential demand functions, ED is __________

A

constant

28
Q

factors the effect price ED

what are the four factors that affect price ED

A
  1. substitutibility of other goods –> greater substitutibility will make the demand curve more elastic
  2. product durability–> demand for more durable products is more elastic
  3. time period–> some demand curves are more inelastic in short run and more elastic in long run
29
Q

supply curve shifters

what are examples of supply curve shifters:

A
  1. input prices
  2. technology and production efficiency
  3. size of market
  4. production conditions ( eg weather)
30
Q

IV

key assumption of IV:

A

parrallel trends assumption, observe parallel trends between treatment/control group in the pre period

31
Q

IV

describe approach:

A

have seperate variable thats associated w/ independent/explanatory variable but not associated w/ dep variable

32
Q

RD

describe approach:

A

utilizeds distinct cut offs or thresholds that determine the assignment of treatment to determine causal effects of the intervention/treatment

33
Q

covariance

Definition:

A

tells us the comovement of two variables

>0 positive relationship

<0 negative relationship

34
Q

correlation

defn:

A

tells the magnitude and direction relationship of two variables

ranges between -1 and 1

35
Q

economic signifigance

what does economic signifigance mean?

A

magnitude

eg: percent increase in ticket sales given a one unit increase in the specified independent variable

36
Q

Poisson Model

what scenario is a Poisson model useful?

A

when dealing with count variables as our dependent variable, especially when count variable has a lot of zeros

37
Q

log-level model

what scenario is a log-level model useful?

A

when the dependent and independent variables have a non-linear relationship

*it assumes constant percentage relationship

38
Q

natural experiment DD model

defn:

A

strategy used when we observe control and treatment groups in real life, and then compare to determine causal relationships between dependent and independent variable

ECNS 309 (1 decks)

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