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Lecture 2

ECON 202 Lecture Notes - Lecture 2: Testability, List Of Fables Characters, Normative Economics


Department
Economics
Course Code
ECON 202
Professor
Ephraim
Lecture
2

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Lecture 2 1/19
Ch 1 Cont.
Caveats about market economies
o People might not immediately do things in the most efficient way
o Governments might interfere with market outcomes
o Market outcomes might ignore the desires of people who are not
involved in transactions ex: pollution
Economic Models
A way that economics approach economics and to analyze the real-world
issues
Follow these steps
o Decide on the assumptions to use in developing the model
o Formulate a testable hypothesis
o Use economic data to test hypothesis
o Revise model if it fails to explain econ data
o Retain the revise model for further questions
Economic variables: something measurable that can have different values,
such as the incomes of doctors
Models must have
o Testability:
o Assumptions and simplifications
Economics is a social science but try to replicate natural science
Positie aalysis: the study of hat is
Noratie aalysis: the study of hat ought to be
Ex:
o Should med school be free?
o High cost of med school may:
Prevent some people from becoming doctors
Lead people to pursue lucrative specialties instead of primary
care
Microeconomics and Macroeconomics
Microeconomics study of
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