ECO101H1 Chapter Notes - Chapter 2: Economic Model, Positive Statement, Dependent And Independent Variables

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1 Dec 2014
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ECO101H1 Full Course Notes
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ECO101H1 Full Course Notes
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Normative statement: statement about what ought to be as opposed to what actually is. Positive statement: statement about what actually is (was or will be), as opposed to what ought to be. Variable: any well-defined item, such as the price or quantity of a commodity, that take on specific values. > endogenous variable: variable that is explained within a theory (also called induced or dependent variable) > exogenous variable: variable that is determined outside the theory (also called autonomous or independent) Assumptions concern motives, directions of causation, and conditions under which the theory is meant to apply. Economic model: abstraction designed to illustrate some point but not to generate testable hypotheses. Theories are tested by confronting its predictions with evidence. Economists must take care when testing predictions to distinguish between correlation and causality. > causality: when a change in one variable causes a change in another variable.

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