Iv the study of individual behavior 3 the economic

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Calculus
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Chapter 15 / Exercise 2
Calculus
Edwards/Larson
Expert Verified
ivThe study of individual behavior.3.The Economic MethodOne can understand value of economics to one’s self by understanding the difference between economists and other scientists.Overview/outline of where we’re going: There are 3 aspects to the economic method.oUse of a specific thought process guided by certain “fundamental assumptions” and “principles of aggregation.”An unambiguous improvement to analysis.By understanding the economic thought process, you will learn both how to better understand human (and firm) behavior and how to make better decisions for yourself.Once I asked Sherwin Rosen whether it was the role of economists to explain why what we observed was efficient, or to tell others how to behave more efficiently. He replied “both.”We’ll see an example of the applicability of these skills to you right now when we shortly talk about the decision to allocate one more hour towards studying for economics versus another subject.This skill allows you to analyze very many things and is a very highly valued skill in the marketplace. Jobs that require more analytical skills tend to pay very well.oUse of Models to Represent Theories. (Can you think of any theories.)Example: PPF and the gains from trade.Has its costs and benefits. Benefit: oProduces very specific predictions that can be tested. If model tests true, policy makers and CEOs can implement policy with
We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
Calculus
The document you are viewing contains questions related to this textbook.
Chapter 15 / Exercise 2
Calculus
Edwards/Larson
Expert Verified
some degree of confidence that program will obtain its objectives.oProvides a nice framework for understanding that is often generalizable to many different issues.Cost: oSometimes problems/issues are too complex to model without excessive simplification that voids the model of interesting and or meaningful results.This skill allows you to think in a more abstract way and fall back on a reservoir of useful models when analyzing new problems/situations.oUse of Econometrics to (1) determine relationships between data (useful for developing theories), (2) to estimate a model, and (3) to test a model’s validity (preferably using different data then the data used to help develop the theory).An unambiguous improvement to analysis. Example of (1): omitted variables and the causal relationship between the cost of car and one’s expected length of life.Example of (2): Estimating a simple econometric equation.Econometrics skills allow our students to write their research papers and our students report that these papers/projects are among the accomplishments that most interest and impress potential employers during interviews.oThe distinctions between economics and the other social sciences is diminishingIncreasingly other faculties are adopting the economic methodology – in particular the use of modeling to create clear and testable predictions and the use econometrics to test those models and to help understand relationships in the data.

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