Chapter 2 Thinking Like an Economist

Chapter 2 Thinking Like an Economist - people could stop...

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Chapter 2 Thinking Like an Economist Economics is amoral; it is not trying to tell you how the things should be. When people tell you what to those are normative values. Positive Economics: The way the world actually works, not how it should be. How economists determine? Observation: Things they observe Ex: For the post thirty years the college GPA rised. One of the things that has changed are the incentives. Teacher evaluations have changed how the universities operate. *Incentives matter In the 90’s the crime rate dropped drastically. Gun control laws. Police hired, something that impacted the crime rate 70’s Roe vs Wade It had impact because
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Unformatted text preview: people could stop having unwanted children; and that stopped them from getting into gangs. Observation is a starting place to create a theory you can test. Theory: We have grade inflation and after testing we can do more observation. Rule Assumptions: Have to fit the circumstances. Models are always an abstraction from reality. Problems to make decisions and choose the relevant pieces of information. Lack of information, too much information. How well does it predict?Is how economists know of the model is right. With the fewest number of predictions. Sales Purchases Receipt Goods and Services Goods and Services Resources Payments...
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