Textbook Notes (368,285)
Canada (161,767)
Economics (385)
ECO100Y5 (290)
Michael H O (131)
Chapter 2

ECO100Y5Y Chapter 2 Notes.docx

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Department
Economics
Course
ECO100Y5
Professor
Michael H O
Semester
Fall

Description
Chapter 2 Notes - Normative Statements: statement about what ought to be as opposed to what actually is o Ex. ought to, should, o States an opinion rather than fact o Depends on a value judgement o Is what we would like to be true o Are value judgements necessary to assess the truth of the statement? - Positive Statements: statement about what actually is (was, or will be), as opposed to what ought to be o No value judgements o Is actually true o They need not be true o Can include value judgement, but still be positive o Only about actual or alleged facts What Are Theories? Three key components of theories; - Variables; well-defined item, such as price or quantity of commodity, which can have specific values o Ex. theory of egg market, variable quantity of eggs might be number of cartons, the price of eggs is the amount of money that is given up to purchase each carton o Endogenous; variable that is explained within theory, aka induced variable/dependent variable (dependant variable) o Exogenous; influences endogenous variable but determined outside theory (independent variable) - Assumptions; concern motives, directions of causation, and conditions of application o Motive; individuals to maximize utility, firms to maximize profit o Direction of Causation; assume causal link between variables o Conditions; assumptions used to specify conditions under which theory is meant - Predictions;
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