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WKU / Economics / ECON 202 / What do positive statements mean?

What do positive statements mean?

What do positive statements mean?


School: Western Kentucky University
Department: Economics
Course: Prin Economics-Micro
Professor: Dean jordan
Term: Spring 2016
Cost: 25
Name: Econ 202 week 3
Description: These notes cover chapter 3
Uploaded: 02/16/2016
3 Pages 197 Views 0 Unlocks

Econ 202 – Professor Stephen Locke  

What do positive statements mean?

Chapter 2 – Thinking like an economist

Feb 2nd and 4th,2016

Feb 2nd Tuesday

The Economist as Scientist  

∙ Good Economic analysis will be objective

o Economic thinking is scientific thinking  

▪ You don’t hire someone on the far right of the political spectrum to  discover the effects of the affordable care act

o Develop and test theories with real-world data

∙ We make assumptions to simplify the complex world and make it easier to understand o Most common assumption – Ceteris Paribus (holding all else constant) ▪ Compare two people of the same race, age, income, etc. The only  

What does a normative statement mean?

difference should be what is being compared.

o Even the best models have assumptions that seem very unrealistic

o A model is judged on its ability to predict, not its assumptions

∙ Question: If you wanted to predict your grade on the first exam in this class, what  variables would you put in your model? What variables would you leave out? o Attendance

o Homework grades

o Study time

▪ Some variables go in, some stay out

First Model

G & S = Goods and Services

What do trade-offs mean?

Don't forget about the age old question of What does equilibrium constant mean?

∙ The government is missing from this model but that is because the government is not  necessary.  

∙ Along with the taxes but we still don’t need them

Second ModelIf you want to learn more check out Why is voluntary participation important?

The Production Possibilities Frontier - Maximum Combinations of output given the available  resources (PPF)

Guns Vs. Butter - PPF

∙ Points inside the PPF are inefficient  

∙ Points on the PPF are efficient If you want to learn more check out How do you respond to working under pressure?

o Since the point is on the PPF the economy is getting all it can from is resources o Society decides where they land on the PPF

∙ Points outside the PPF are unattainable  

o Trade makes the unattainable possible

What do we learn from this simple model?

∙ Scarcity – We can’t have all of everything

∙ Trade-offs – Must give up one good to get more of another

∙ Opportunity cost – more guns means less butter

∙ Increasing Marginal opportunity cost – if the resources are similar the PPF will be  straight but if the resources are different then the PPF will be bowed

Feb 4th Thursday  

Positive vs. Normative Statements

∙ Positive statements – Claims that attempt to describe the world as it is, was, or will be.  o These can be tested Don't forget about the age old question of What is centroid formula?

▪ “It will be 48 degrees’ tomorrow” – can be tested

∙ Normative statement – Claims that attempt to describe how the world should be o Opinions and non-verifiable statements

▪ “I think…” or “We should…” are how these statements begin.

∙ Normative statements influence positive statements because the normative statements  influence how the world is viewed and bias puts a lens on what we believe the world can  be like. We also discuss several other topics like A fisherman describes his latest’s catch at 61.5 cm rainbow trout with a mass of 2.35 kg. what is the uncertainty in this situation?
If you want to learn more check out What is the importance of production possibility frontier?

Reason for disagreement among Economist

There are two main reasons economists disagree

∙ Validity of alternative positive theories

o Disagree about assumptions

∙ Difference in values

o Economists are all human and have a broad range of beliefs and values  A few things to keep in mind

∙ Correlation is not causation

o The more storks there is does not mean the storks are causing more births ∙ Look out for omitted variables  

o The more tornadoes identified does not mean the weather is getting worse, over  time the technology to identify the tornadoes has gotten better.

∙ Look for reverse causation

o More cops do not mean more crime. The reverse is actually the case. We then worked on plotting points on graphs that were handed out in class

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