Chapter 1 Flashcards
1
Q
Exogenous variable
A
Variable take as a given
2
Q
Endogenous variable
A
Value is determined through the system being studied
3
Q
Constrained optimization
A
Tool for making optimal choice, taking into account any limitations
4
Q
Objective function
A
A relationship (function) that a decision maker seeks to maximize
5
Q
Constraints
A
Limits imposed on a decision maker in a constrained optimization problem
6
Q
Comparative statics
A
How a change in some exogenous variable will affect the endogenous variable
7
Q
What is a positive analysis?
A
Explains how an economic system works
8
Q
What is a normative analysis?
A
Examines what should happen to enhance or detract
