aggregate, p. 11 economic perspective, p. 4 economics, p. 3 fallacy of composition, p. 13 generalizations, p. 8 macroeconomics, p. 11 marginal analysis, p. 5
microeconomics, p. 11 normative economics, p. 12 "other-things-equal"
assumption, p. 8 policy economics, p. 9 positive economics, p. 12
post hoc, ergo procter hoc fallacy, p. 14 principles, p. 7 scientific method, p. 6 theoretical economics, p. 7 tradeoffs, p. 10
1. KEY QUESTION Use the economic perspective to explain why someone who is normally a light eater at a standard restaurant may become a bit of a glutton at a buffet-style restaurant that charges a single price for all you can eat.
2. What is the scientific method and how does it relate to theoretical economics? What is the difference between a hypothesis and an economic law or principle?
3. Why is it significant that economics is not a laboratory science? What problems may be involved in deriving and applying economic principles?
4. Explain the following statements:
a. Good economic policy requires good economic theory.
b. Generalization and abstraction are nearly synonymous.
c. Facts serve to sort out good and bad hypotheses.
d. The other things equal assumption helps isolate key economic relationships.
5. KEY QUESTION Explain in detail the interrelationships between economic facts, theory, and policy. Critically evaluate this statement: "The trouble with economic theory is that it is not practical. It is detached from the real world."
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