ECN 204 Chapter 2: Chapter 2.docx

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tanpug238

25 Feb 2012

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Document Summary

The scientific method: observation, theory and more observations. Scientific method the dispassionate development and testing of theories and how the world works. In the field of economics, there is a interplay between theory and observation. where scientists, can perform many test and experiments to generate useful data: economics pay close attention to natural experiments offered by history. For economists assumptions can simplify the complex world and make it easier to understand. When thinking about international trade, if we assume there are two countries in the world, it is easier to focus our thinking, which helps understand international trade in the more complex world. Economists use different assumptions to answer different questions. Economists uses models through diagrams and equations: economic model omit many information to allow use to see what is important, economic models are built with assumptions. The economy consists of millions of people engaged in many activities like buying, selling, working, hiring , manufacturing, and so on.

Related Questions

An economic model is

	a means of empirically testing an economic theory.
	a generalization about the workings of an abstract economy.
	a commonly held economic insight stated as a law or general assumption.
	a framework that places the generalized insights of a theory in a more specific contextual setting.

What besides a model do economists need to make policy recommendations?

	Economists need to understand the empirical evidence supporting the theory as well as real-world economic institutions to make policy recommendations.
	Economists also need to know the assumptions on which the model is based to make policy recommendations.
	Economists need to understand the empirical evidence supporting the theory to make policy recommendations.
	Economists need to understand the empirical evidence gathered through testing the model.