ECON 1B03 Lecture Notes - Lecture 2: Natural Experiment, Scientific Method

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Hannah Holmes

Document Summary

Express ideas in economics: english language, algebra / equations, diagram / graph. Translate between each different form of communication. When price of x" goes up, sales of x" goes down. Science = use scientific method: observe, theorize, test theory. Microeconomics: individual household & firms and how they interact. Macroeconomics: economy-wide phenomena such as interest rates, unemployment, money, and growth. Efficiency is the size of the pie. Equity is how the pie is divided. Positive: attempt to describe the world as it is". Normative: attempt to describe the world as it should be". Economists most often use diagrams or equations: omit details that enable us to see what is important. Assumptions: economists make assumptions because; assumptions can simplify the complex world and make it easier to understand. Real variables (measured in quantities) vs. normal variables (measured in dollars) Stock variables (snapshot at a point in time) vs. flow variables (measured over a certain time period) relationship of variable with time.