eco hw 02
To say that economists use the scientific method means that they are using ___________ How do economists distinguish between models that work and those that don't?
an ongoing process to develop models of the world and then test and evaluate those models They test their models against real-world data
The mean and the median are closely related concepts. The median is the numerical value separating the higher half of your data from the lower half. You can find the median by arranging all of the observations from lowest value to highest value and picking the middle value (assuming you have an odd number of observations). Although the mean and median are closely related, the difference between the mean and the median is sometimes of interest.
answer in next one
Suppose you have been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. Your client would like your team to perform a study on customers' gasoline purchasing habits when they notice price increases You suggest that the team _____________.
design and execute an experiment
Suppose you are on a date with an economics major, and you want to impress them by asking good economic questions. Two characteristics of a good economic question are:
1. It is important to individuals or society . 2. It can be answered .
Suppose country A has five families. Their incomes are $9000, $20 000, $29000, $40000, and $49 000. --Suppose country B also has five families. Their incomes are $9000, $20000, $29000, $40000, and $149000 Suppose you thought income inequality in the United States had increased over time. Based on your answers to this question, would you expect the ratio of the mean income in the United States to the median income has risen or fallen? Explain.
Country A's median income is $29,000, and its mean income is $29,400 ---Country B's median income is $29,000, and its mean income is $49,400 -Country B has greater income inequality Risen, because means change more with extreme values.
Demonstrate causation or correlation with the following examples:
More police officers and lower crime rates is likely to be causation . More economic growth and higher employment levels is likely to be causation . The length of women's skirts and stock market performance is likely to be correlation
Suppose you have been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. Your client wants to know what will happen to gasoline demand if it increases gasoline prices by one cent higher than its nearest competitors. One of the members of your consulting team, Debbie, shares that one time in college she stopped buying gasoline from a service station that was one cent more expensive. `Based on this story, should you conclude that demand will fall to zero if the client raises gas prices by one cent?
No , since this is an argument by anecdote , which can lead to wrong conclusions
You are able to collect the following data on the impact of a one-cent increase in gasoline prices. Calculate the percentage change in demand for each service station. (Round your responses to two decimal places. If the change is negative, be sure to include a minus sign.)
Service Station Gasoline Sold (thousands of gallons) With No Price Increase Gasoline Sold (thousands of gallons) With 1-Cent Price Increase Percentage Change A 120 70 -41.67 B 150 140 -6.67 C 210 170 -19.05 D 300 280 -6.67 The average percentage change is -18.52 percent
What is meant by randomization in the context of an economic experiment?
Subjects are assigned by chance, rather than by choice, to a group.
In general people with more education earn higher salaries. Economists have offered two explanations of this relationship. The human capital argument says that high schools and colleges teach people valuable skills, and employers are willing to pay higher salaries to attract people with those skills. The signaling argument says that college graduates earn more because a college degree is a signal to employers that a job applicant is diligent, intelligent, and persevering
The signaling argument implies that a college student who drops out of school one month before graduation should earn much less than a student who graduates. The human capital argument implies that a college student who drops out of school one month before graduation should earn almost the same as a student who graduates.
How does the sample size affect the validity of an empirical argument?
The larger the sample size the better.
How is the mean calculated from a series of observations? Suppose 1560 people bought popsicles on a hot summer day. If the average number of popsicles that each person bought is 5, the number of popsicles sold that day is
The mean is the sum values of the observations divided by the number of observations. 7800
How would you represent the following graphically? Income inequality in the United States has increased over the past 10 years. All the workers in the manufacturing sector in a particular country fit into one (and only one) of the following three categories: 31.5 percent are high school dropouts, 63.5 percent have a regular high school diploma, and the rest have a vocational training certificate. The median income of a household in Alabama was $43,464 in 2012 and the median income of a household in Connecticut was $64,247 in 2012 .
This could best be represented with a time series graph .. This could best be represented with a pie chart . this could best be represented with a bar graph .
Suppose you have been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. Your client would like your team to perform a study on customers' gasoline purchasing habits when they notice an increase in the price of gas.
To set up your experiment on how price-increase awareness impacts customer behavior, you would have 70 people in your treatment group and 50 people in your control group.
Which of the following questions is not an example of an issue a researcher could study to contribute to the welfare of society? Which of the following statements regarding economic questions is not correct?
What combination of colors can one use to paint his bedroom wall The questions must have implication on individuals' choices and their budget.
Suppose that you are on a date with an economics major, and you want to impress them by talking about economics. Your date challenges you to state your knowledge of positive and normative questions. --.--Which of the following examples do you provide as a normative question? -Which of the following do you provide as a positive question?
You say that positive questions ask what is or what will be and normative questions ask what ought to be Should welfare be repealed? How much is the national debt?
As the text explains, it can sometimes be very difficult to sort out the direction of causality. Causation occurs when there is ____________.
a logical cause-and-effect relationship.
He is still unconvinced about the reliability of using economic models to make business decisions. You can answer this concern by sharing that you will confirm the accuracy of the model by
testing its predictions with empirical data
Debbie, a member of your team, advocates finding random people and then breaking them up into two groups. Group A would be shown an increase in the price of gas before taking the survey. Group B would be told there was no increase in the price of gas before taking the survey. Troy, another member of your team, recommends finding two groups of people already sorted by whether or not they have recently noticed an increase in the price of gas.
Debbie's method is a controlled experiment and Troy's method is a natural experiment . Group A is the treatment group and Group B is the control group
A simple economic model predicts that a fall in the price of bus tickets means that more people will take the bus. However, you observe that some people still do not take the bus even after the price of a ticket fell. Is the model incorrect? How would you test this model?
No, because it predicts the outcome of increased bus ridership on average. You should run a natural experiment by analyzing bus ridership and price changes
`Suppose you have just been hired as a management consultant by a major oil company to help it optimally price gasoline at its service stations. During a meeting with your client, the CEO asks if your economic models include all factors that impact gasoline prices. What is your response to his question? `Your client becomes critical of your "sloppy" technique of using a model that does not include all factors. What is the most appropriate reply to this criticism?
No, the model is a simplified representation of reality. Economic models are meant to be approximations that predict what happens in most circumstances
