Unit 5: Models - the need for abstraction

Vocabulary flashcards covering the fundamental concepts of economic modeling and abstraction based on Unit 5 lecture notes.

Models

Simplified abstractions of the real world that approximate reality and make problems easier to analyse; the means through which economists organize their thoughts about human behaviour.

Ceteris paribus

A Latin phrase meaning "other things being equal" or that all variables other than the ones being studied are assumed to be constant.

Good models

Economic models that use relevant factors in their framework and perform and predict well empirically.

Poor (Bad) models

Models that do not use relevant factors and fail to perform or predict well.

Fallacy of composition

One of the two specific types of logical fallacies that economists must try to avoid when formulating theories.

Post hoc fallacy

One of the two specific types of logical fallacies that economists must try to avoid when formulating theories.

Abstractions

Assumptions taken from the real world used in models because people's minds are limited and nature's riddles are complex.

Economic theory limits

The restriction that economic theory cannot be tested like physical theories because it is difficult to conduct controlled laboratory experiments on human beings.