Microeconomics - Chapter 2: Economic Theories, Data, and Graphs

These flashcards cover key economic concepts, definitions, and important terms related to the study of microeconomics from Chapter 2, helping students understand core theories, data, and graphing methods.

Positive Statement

A statement about what is, was, or will be, that does not involve value judgments.

Normative Statement

A statement about what ought to be, which depends on value judgments and cannot be evaluated solely by facts.

Economic Theories

Abstractions from reality that consist of variables, assumptions, and predictions to help understand the economy.

Endogenous Variables

Variables that are explained within a theory.

Exogenous Variables

Variables that are outside the theory.

Correlation

A relationship between two variables, where they move together in the same or opposite directions.

Causation

Establishing a direct cause-and-effect relationship between variables, usually requiring advanced statistical techniques.

Index Numbers

A measure of some variable, expressed relative to a base period, with a base value usually set at 100.

Cross-Sectional Data

Data collected at a single point in time across multiple subjects or units.

Time-Series Data

Data collected over time, tracking the same subject or unit over different time periods.

Marginal Response

The change in one variable in response to a change in another variable.

Diminishing Marginal Response

A concept where the increase in output from an additional unit of input decreases as the input increases.

Increasing Marginal Costs

A situation where the cost of producing an additional unit of output increases as production continues.

Example of Endogenous Variables

The price and quantity of a good in a supply and demand model, where the price affects the quantity supplied and demanded, and these quantities then influence the price.

Example of Exogenous Variables

Weather conditions that affect agricultural production, where these conditions are not influenced by the economic model but can impact the supply of agricultural goods.