Chapter 2 Midterm

Question 1

normative statements vs positive statements

Answer 1

normative: VALUE JUDGEMENTS. Somewhat subjective, based on facts but not entirely dependant on them; SHOULD STATEMENTS

Positive: based entirely on factual information, statements of fact. LEAD TO, CAUSE…

Question 2

ENDOGENOUS VS EXOGENOUS STATEMENTS

Answer 2

ENDOGENOUS :A​ variable, such as price or​ quantity, that is determined WITHING A THEORY. DEPENDANT VARIABLE

EXOGENOUS: A variable that is determined OUTSIDE the theory, INDEPENDANT VARIABLE

Question 3

An economic theory uses assumptions to

Answer 3

make the complexities of the real world more abstract to focus more sharply upon the issues under examination.

Question 4

WHAT DO INDEX NUMBERS MEASURE?

Answer 4

RELATIVE CHANGES

Question 5

what is the typical relationship of price and level of improvement in non-linear functions? AKA MARGINAL CHANGE

Answer 5

It is typically cheaper to begin inital improvements, but as the subject reaches a higher level of improvement, the costs rise as well. LAW OF DIMINISHED RETURNS