What are normative statements based on?
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Value judgments and cannot be evaluated solely by facts.
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What are normative statements based on?
Value judgments and cannot be evaluated solely by facts.
What should a responsible economist clarify in discussions?
Which part of the advice is normative and which part is positive.
What characterizes positive statements?
They do not involve value judgments and are about matters of fact.
What happens to the slope of a non-linear function as X changes?
The slope of the curve changes.
What is the relationship called when two variables move in opposite directions?
Negatively related.
What challenges do economists face when analyzing variables?
The variables are generally influenced by many forces that vary simultaneously.
What is indicated by increasing marginal production costs?
As production increases, the cost of producing additional units rises.
Why do economists develop theories or models?
To help them understand economic events in the real world.
What is the wage income when consumption is $800?
$0.
What is the relationship between theory and empirical testing in economics?
There is a continual interaction where theories are tested and refined based on empirical data.
What is the slope of the line between points A and B in the pollution reduction example?
-0.5.
What do economists design methods for?
To analyze and evaluate government policies and examine global economic risks.
What is a theory in economics?
An abstraction from reality.
What are exogenous variables?
Independent variables that are outside the theory.
What does it mean when two variables are positively related?
It means they move together in the same direction.
What type of data is used in the Canadian unemployment rate graph?
Annual average of monthly, seasonally adjusted data.
What type of function is represented in the figure?
Non-linear functions.
What is required to analyze complex economic data?
The use of appropriate—and complex—statistical techniques.
What does the figure represent regarding income and consumption?
It shows the relationship between wage income and consumption levels.
What does a function with a minimum represent?
The lowest point of output or cost in relation to input.
What role do graphs play in economics?
Graphs help display data and illustrate economic theories.
What does it mean when we say Y is a function of X?
It means that for every value of X, there is only one possible value of Y.
What type of graph is used in Figure 2-3?
Cross-sectional graph.
How do economists often express their disagreements?
In public discussions.
What are endogenous variables?
Dependent variables that can be explained within a theory.
What is the purpose of statistical analysis in economics?
To test a hypothesis such as 'if X occurs, then Y will also happen.'
What does the figure illustrate regarding costs?
Increasing marginal cost.
What is an index number?
A measure of some variable, conventionally expressed relative to a base period assigned the value 100.
What is the most common index number?
The Consumer Price Index (CPI).
Can you give examples of single economic variables?
Unemployment, national income, or the average price of a house.
What is usually required to establish causality?
Advanced statistical techniques.
What does ΔP represent in the context of pollution reduction?
The change in pollution, which is -1000 in this case.
What consumption level corresponds to a wage income of $10,000?
$8,800.
What does Figure 2-2 illustrate?
Index Values for Steel and Newsprint Output.
What does a positive statement describe?
What actually is, was, or will be.
How is a theory tested in economics?
By confronting its predictions with evidence.
What does the marginal response of Y to a change in X depend on?
The value of X.
What are the two basic forms of economic data?
Cross-sectional data and time-series data.
What is a scatter diagram?
A graph showing two variables, one measured on each axis.
Is correlation evidence of causation?
No, correlation is not direct evidence of a causal relationship.
What does a function with a maximum represent?
The highest point of output or profit in relation to input.
What is the consumption level when the wage income is $2,500?
$2,800.
What does ΔE represent in the context of pollution reduction?
The cost of reducing pollution, which is $2000.
What year is the data from in Figure 2-3?
What happens to consumption when wage income (W) is zero?
Consumption is $800 a year.
What is a common reason for disagreements among economists?
The positive/normative distinction.
What does a normative statement describe?
What ought to be.
How do economists contribute to understanding economic growth?
By examining global economic risks.
What role do assumptions play in a theory?
They provide the foundational basis for the predictions made by the theory.
What does the time-series graph of the Canadian unemployment rate represent?
The unemployment rate from 1978 to 2021.
What does positive correlation indicate?
That X and Y move together in the same direction.
Which organization provided the data for the Canadian unemployment rate graph?
Statistics Canada.
What does each point on a scatter diagram represent?
The values of the variables for a particular unit of observation.
What do most economic predictions involve?
Causality.
How do economists use graphs?
To illustrate their theories.
At a wage income of $5,000, what is the corresponding consumption?
$4,800.
What does Figure 2-3 represent?
A cross-sectional graph of average house prices for 10 Canadian provinces in 2021.
What is the consumption function based on wage income in the example provided?
C = $800 + 0.8W, where C is consumption and W is wage income.
What does the RCT approach help determine?
Underlying causality among economic variables.
What are the components of a theory?
Variables, assumptions, and predictions.
What happens if a theory conflicts with facts?
It will usually be amended or discarded for a superior theory.
What type of experiments do economists rely on for statistical analysis?
Millions of 'uncontrolled' experiments occurring daily in the marketplace.
What indicates that two variables are linearly related?
The graphs of these relationships are straight lines.
What is a function that is not graphed as a straight line called?
A non-linear function.
What does the Consumer Price Index (CPI) represent?
The average price paid by consumers for a typical 'basket' of goods and services.
What is the process involved in testing economic theories?
A continual back-and-forth process between empirical testing of predictions and refining the theory.
What is illustrated in Figure 2-10?
Profits as a function of output.
What is the consumption level when the wage income reaches $7,500?
$6,800.
How can a function be expressed?
In a verbal statement, numerical schedule (table), mathematical equation, or graph.
What technique have some economists begun to adopt from the medical field?
Randomized controlled trials (RCT).
What do predictions in a theory represent?
Expected outcomes based on the relationships between variables.
What is central to the study of economics?
The scientific approach.
What concept is illustrated by the figure mentioned in the text?
Diminishing marginal response.
What does negative correlation indicate?
That X and Y move in opposite directions.
What age group is included in the Canadian unemployment rate data?
Both sexes, 15 years and over.
How is the value of an index number calculated?
Absolute value in given period divided by absolute value in base period, multiplied by 100.
How is the slope of a straight line calculated?
As ΔP/ΔE.
What is illustrated in Figure 2-11?
Average fuel consumption as a function of speed.
What does a slope of -0.5 indicate in the pollution reduction context?
For every 1 unit decrease in pollution, there is a $2000 cost increase.
What do economists generally lack the ability to do?
Set up controlled experiments necessary to find cause.
Which organization provided the source for the data in Figure 2-3?
The Canadian Real Estate Association.
How much does consumption increase for every extra dollar of wage income?
By 80 cents.
What are economists primarily interested in?
Causal relationships in data.
What is the notation used to express consumption as a function of wage income?
C = f(W).
