In what sense is economics like a science?
Economics is like a science because economics devise theories, collect data, and analyze the data in an attempt to verify or refute their theories. In other words, economics is based on the scientific method.
Draw a production possibilities frontier for a society that produces food and clothing. Show an efficient point, an in efficient point, and an infeasible point. Show the effects of a drought.
Suppose total cost of food and clothing is fixed as $100. Cost of each unit of food is $1 while that of each unit of clothing is $2. Define quantity of food as x and quantity of clothing as y. Then, x + 2y = 100.
Therefore, y = -0.5x + 50.
- It applies scientific method which is "Observation, Theory, and More Observation".
- Assumptions plays an important role in studying economics, serving as to simplify questions.
- Economists use models based on assumptions to simplify reality.
Economics is like a science because economics devise theories, collect data, and analyze the data in an attempt to verify or refute their theories. In other words, economics is based on the scientific method.
Draw a production possibilities frontier for a society that produces food and clothing. Show an efficient point, an in efficient point, and an infeasible point. Show the effects of a drought.
Suppose total cost of food and clothing is fixed as $100. Cost of each unit of food is $1 while that of each unit of clothing is $2. Define quantity of food as x and quantity of clothing as y. Then, x + 2y = 100.
Therefore, y = -0.5x + 50.
A is an efficient point. B is an inefficient point.
When there is a drought, the cost of each unit of food will increase to (suppose it's) $2.
Then, the function will be 2x + 2y = 100.
Therefore, y = -x + 50.
When there is a drought, the cost of each unit of food will increase to (suppose it's) $2.
Then, the function will be 2x + 2y = 100.
Therefore, y = -x + 50.
The effects of a drought is the white line moving to yellow line.
Figure 2-1 shows the production possibilities frontier for a society that produces food and clothing. Point A is an efficient point (on the frontier), point B is an inefficient point (inside the frontier), and point C is an infeasible point (outside the frontier).
The effects of a drought are shown in Figure 2-2. The drought reduces the amount of food that can be produced, shifting the production possibilities frontier inward.
The effects of a drought are shown in Figure 2-2. The drought reduces the amount of food that can be produced, shifting the production possibilities frontier inward.
Define microeconomics and macroeconomics.
According to the book, definitions of microeconomics and macroeconomics are as follows.
Microeconomics is the study of how households and firms make decision and how they interact in the markets.
Macroeconomics is the study of economy-wide phenomena, including inflation, unemployment, and economic growth.
Give an example of a positive statement and an example of normative statement.
An example of a positive statement is "higher taxes discourage work effort." It is a positive statement because it is a claim that describes the world as it is. As example of a normative statement is "the government should reduce tax rates." It is a normative statement because it is a claim that prescribes how the world should be. Many other examples are possible.
Name three parts of government that regularly rely on advice from economics.
Parts of the government that regularly rely on advice from economists are the Department of Treasury in designing tax policy, the Department of Labor in analyzing data on the employment situation, the Department of Justice in enforcing the nation's antitrust laws, the Congressional Budget Office in evaluating policy proposals, and the Federal Reserve in analyzing economic developments. Many other answers are possible.
Why might economists to the present disagree about a question of policy?
Because they hold different opinions on truth or value.
Economic advisers to the president might disagree about a question of policy because of differences in scientific judgments or differences in values.
According to the book, definitions of microeconomics and macroeconomics are as follows.
- Microeconomics is the study of how households and firms make decision and how they interact in the markets.
- Macroeconomics is the study of economy-wide phenomena, including inflation, unemployment, and economic growth.
Microeconomics is the study of how households and firms make decision and how they interact in the markets.
Macroeconomics is the study of economy-wide phenomena, including inflation, unemployment, and economic growth.
Give an example of a positive statement and an example of normative statement.
- POSITIVE STATEMENT - Studying economics helps enhance personal productivity.
- NORMATIVE STATEMENT - I should study economics hard.
An example of a positive statement is "higher taxes discourage work effort." It is a positive statement because it is a claim that describes the world as it is. As example of a normative statement is "the government should reduce tax rates." It is a normative statement because it is a claim that prescribes how the world should be. Many other examples are possible.
Name three parts of government that regularly rely on advice from economics.
- The Department of Treasury relies on advice from economics to design tax policy.
- The Department of Labor relies on advice from economics to formulate labor-market policies.
- The Department of Justice relies on advice from economics to enforce the nation's antitrust laws.
Parts of the government that regularly rely on advice from economists are the Department of Treasury in designing tax policy, the Department of Labor in analyzing data on the employment situation, the Department of Justice in enforcing the nation's antitrust laws, the Congressional Budget Office in evaluating policy proposals, and the Federal Reserve in analyzing economic developments. Many other answers are possible.
Why might economists to the present disagree about a question of policy?
Because they hold different opinions on truth or value.
Economic advisers to the president might disagree about a question of policy because of differences in scientific judgments or differences in values.
