ECON 1011 Lecture Notes - Lecture 3: Stop Sign, Inductive Reasoning, Marginal Utility
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Deduction: if a, b, c, then x, y, z. Inductive reasoning: if we observe y then x could explain it. y= observations, Observations, data, then demonstrated outcomes and use these to infer what must have cause these outcomes to arise. Lines represent roads, small circles represent stop signs. Models simplify what it"s representing: as long as we all agree. Simplification eliminates complexities that are not relevant to the immediate purpose. Assumptions that simplify vs assumptions that reflect reality. Simplifying assumptions: eliminates extraneous information and to help make it easier to a proper function, use and implications of the model. House graphic doesn"t look like a house. Realistic assumptions: matches the reality of the world ex. Stop sign must match where they are in the real world. Directions of arrow must travel in the same direction it points. Some aspect of the world that seems important.
