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chapter1ans - Chapter 1 HW – Answer guide Review...

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Unformatted text preview: Chapter 1. HW – Answer guide Review quiz (page 2, 8, 11) - There is no exact answer. Grading is based on relevance. Review quiz (page 14) 1. A positive statement is an objective description of how the world is. It is testable. A normative statement is a subjective description of how the world ought to be. 2. A model is a description of how the real world works. It is designed to reflect those aspects of the world that are relevant to the user of the model and ignore the aspects that are irrelevant. 3. A theory is an implication arising from a model and is used to describe some observable action occurring in the real world. “It might work in theory, but it doesn’t in practice,” is a silly statement because theories are only as good as the models they are based upon. If a theory fails to predict the outcome, either the model it was based on was poorly constructed with false assumptions about how the various elements in the model interact with each other and/or the environment, or the model design lacked a relevant aspect of the world. If a model is well constructed, it will generate good theories. 4. Ceteris paribus is a Latin phrase meaning “other things equal,” and this assumption is used in economic modeling of individuals, businesses, or governments making choices. This assumption holds all relevant aspects of an economic model unchanged except the one aspect that economists are interested in when trying to uncover “cause and effect” relationships within the model. 5. There is no exact answer. Grading is based on relevance. Problems (page 16) Critical thinking & Web Activities (page 16) - There is no exact answer. Grading is based on relevance. ...
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