Chapter 2 - Economic theories, data and graphs Flashcards Preview

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Flashcards in Chapter 2 - Economic theories, data and graphs Deck (29)
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1

Normative statement def

depends on value judgment, opinion. can't be supported by facts

2

Positive statements def

Statements about what is, was or will be. Not biased by value judgments

3

Why economists disagree in public discussions

Poor communication or failure to acknowledge their ignorance.

4

Biggest source of public disagreement upon economists and what they should do

Positive/normative distinction. Should make difference between normative advice and positive facts

5

3 things theory consists of

1) Set of definitions about variables (endogenous and exogenous)
2) Set of assumptions (motives, causation, etc.)
3) Set of predictions (or hypotheses)

6

Endogenous variable def

Variable we want to study/explain/understand

7

Exogenous variable def

Other variables that influence the endogenous variable

8

Testing theories 2 things

1) Confronting predictions with evidence
2) Amend the theory if inconsistent with facts

9

2 things that can happen with theory

1) Rejected by data -> put into question
2) Confirmed by data (no matter how unlikely theory is, confirming data will be found)

10

Positive correlation meaning

X and Y move together

11

Negative correlation meaning

X and Y move in opposite directions

12

Correlation vs causality

Correlation -> association
Causality -> X causes Y

13

Reverse causality

X and Y related in a way that is opposite to what we expected

14

Branch of science used in economy

statistics

15

How data can be displayed (2)

Tables or graphs

16

What do we use if we are interested in relative movements of variables

index numbers

17

index number def

Compares changes in some variable relative to some base period

18

index formula

Value of index in given period = absolute value in given period/absolute value in base period x 100

19

Two forms in which economic variables come and def

Cross-sectional data (picture in time)
Time-series data (evolution in time)

20

Scatter diagram def

Points -> shows relationship between 2 variables

21

Scatter diagram interpretations (4) and what they mean

1) Strong correlation : strong relationship
2) Weak correlation : look for alternative factors with stronger relationships
3) No correlation : look for alternative relationship
4) J-shaped association : complex relationship

22

Functional relations 4 ways to express them

1) Verbal statement
2) Mathematical equation
3) Table (numerical schedule)
4) Graph

23

what do we say about variables when graph of relationship between 2 variables is a straight line

linearly related

24

what do we say about variables when graph of relationship between 2 variables is NOT a straight line

non-linearly related

25

4 types of linear relationships

1) Positive slope
2) Negative slope
3) Zero slope
4) Infinite slope

26

4 types of non-linear relationships

1) Positive slope
2) Negative slope
3) Positive then negative
4) Negative then positive

27

Linear or non-linear relationships : which is more common

non-linear

28

How to use the slope

Look for absolute value

29

What concept can the slope be associated with

marginal response (of Y to X)