What are the three common mistakes in building a model? How do you differentiate positive and normative? What are the questions all economies have to answer?

Name: Lecture 1
Brand: StudySoup
SKU: 2648079
Price: 45.00 USD
Availability: InStock
Rating: 5 (1 reviews)

Lecture 1 Tuesday, January 9, 2018 10:24 AM Economics=allocation of scarce resources Difference between positive and normative a. positives can be tested b. Normative is an opinion Self-interest hypothesis: people make decisions based on what they believe is best for their own interest - Does not rule out altruism - Rationality: respond to price (if the cost is lowered you're more likely to respond) Opportunity Cost- best forgone alternative Free v Fair - Free does not exist - Fair is normative Three commonmistakes in building a model 1. Ceteris paribus= everything is held constant if it is not being tested 2. Cause/effect fallacy or correlation as causation= just because two things happen together does not mean