ECON 101 Chapter Notes - Chapter 2.2: Exogeny, Equation
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ECON 101 Full Course Notes
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Theories are distinguished by their variables, assumptions, and predictions. A well defined item, such as the price or quantity of a commodity, that can take on various specific values. Endogenous variable: a variable that is explained within a theory. Sometimes called an induced variable or a dependent variable. Exogenous variable: a variable that is determined outside the theory. Sometimes called an autonomous variable or an independent variable. An exogenous variable influences the endogenous variables, but it itself is determined outside the theory. A theory"s assumptions concern motives, directions of causation, and the conditions under which the theory is meant to apply. Theories make the fundamental assumption that everyone pursues his or her own self-interest when making economic decisions. When economists assume that one variable is related to another, they are usually assuming some causal link between the two. One factor (independent variable) causes the other (dependent)
