WEEK2 Flashcards
define economics.
Economics is the science that deals with making choices and the consequences of resource scarcity
describe health economics.
health economics addresses the consequences of resource scarcity in the healthcare industry
Descriptive Economics
Description involves the identification, definition, and measurement of phenomena.
Explanatory Economics
The second task of economics is explaining and predicting certain phenomena. This task involves conducting a cause-and-effect analysis. In undertaking such a task, we are moving one step beyond description; we are now identifying the causes of certain events that have occurred. This task is performed with the aid of models that classify various causal factors (assuming there is more than one) in a systematic framework. Based on this framework, hypotheses are developed about the net effect of each causal factor on the phenomena we want to explain.
Evaluative Economics
This task involves judging or ranking alternative phenomena according to some standard or relative position of alternatives. An acceptable standard is chosen, then used to rank alternative ways of distributing scarce resources. In choosing the standard, one major criterion is acceptability. Standards are easy to come by; however, many are controversial, and the standard chosen should have some degree of acceptability.
define the term economic variable.
An economic variable is an economically relevant phenomenon whose value or magnitude may vary. Examples of economic variables include prices, costs, incomes, and quantities of commodities.
describe relationships between economic variables.
a. The relationship shows how one variable changes with respect to another variable.
These relationships can be causal or noncausal.
define the direction of an economic relationship, and explain its significance.
First, the relationship may be positive
If there was a causal relationship between them, and if the direction of causation ran from price to quantity, we would hypothesize that as price increases, so does quantity
The relation is a negative—the greater the price, the smaller the quantity.
The remaining cases show where variables are unrelated. For curve C, whatever the quantity of visits, the price stays the same
define the slope of an economic relationship, and explain its significance.
The slope of a geometric relationship shows how much of a change in one variable is associated with a given change in a related variable.
Slope of Relationships. In relationship E, the price increases more than in relationship F for a given increase in quantity. In relationship H, the price decreases more than in relationship G for a given increase in quantity.
define the position of an economic relationship.
The essential point of this figure is to show how the two lines are positioned with respect to each other. Line K is higher than J in the sense that, at any specific price, the related quantity of visits for K is greater than the related quantity for J.
distinguish between linear and nonlinear economic relationships.
linear relationships, in which the change in one variable with regard to a given change in another variable is fixed.
nonlinear relationships. For this type of relationship, the magnitude of the response will vary along the curve
explain what is meant by an economic model, and distinguish between assumptions and conclusions in an economic model.
In explanatory economics, implications are tested against actual data to see if what we predicted actually does occur. The true test of an explanatory model is how well it explains or predicts actual phenomena. In evaluative economics, our task is somewhat different—we compare the actual against the ideal set of events. Nevertheless, whether we are deriving explanatory or evaluative principles, we put our propositions into a logical form that allows us to incorporate a number of variables into our analysis simultaneously.
