Econ chapter 2
To say that economists use the scientific method means that they are using
an ongoing process to develop models of the world and then test and evaluate those models.
How does the sample size affect the validity of an empirical argument?
bigger is better
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 _____________and Troy's method is a _________. Part 4 Group A is the __________ and Group B is the ________.
controlled experiment......natural experiment A-treatment group.....B-control group
_________ is an empirical study in which some process—out of the control of the experimenter—has assigned subjects to control and treatment groups in a random or nearly random way.
A natural experiment
independent variable should be plotted
on the x-axis
The dependent variable should be plotted
on the y-axis
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?
Economic models are meant to be approximations that predict what happens in most circumstances.
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?
No, the model is a simplified representation of reality.
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. Part 2 _____________ argument implies that a college student who drops out of school one month before graduation should earn much less than a student who graduates. ______________ 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.
The signaling .....The human capital
How do economists distinguish between models that work and those that don't?
They test their models against real-world data.
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.
You say that positive questions ask ___________and normative questions ask_________
what is or what will be..... what ought to be
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?
Risen, because means change more with extreme values.
