ECN 104 Chapter Notes - Chapter 2: Political Philosophy, Opportunity Cost, Pie Chart
26 Jan 2014
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The scientific method: observation, theory and more observation. Economists must make do with whatever data the world happens to give them. They play close attention to the natural experiments offered by history. The scientific method: the systematic pursuit of knowledge through the formulation of a problem, collection of data, and the formulation and testing of hypotheses. Assumptions are made to simplify the complex world for easier understanding. The art in scientific thinking is deciding which assumptions to make. Economists use different assumptions in terms of short-run and long-run effects. Ceteris paribus (other things equal): it is assumed that all other variables except those under immediate consideration are held constant for a particular analysis. Economists use diagram and equation models to learn about the world. Economic models omit the details to better understand what is truly important. All models are built with assumptions and does not include every feature of the economy.
