ecn 104 week 1.2)

MODEL

simplified description of reality

why do economists use data?

to EVALUATE accuracy of models and understand how world works 🌏

experiments help economists to measure what? ↔

CAUSE and EFFECT

is college worth it?

opportunity cost of at least 16.55/hr = 23,170

THE SCIENTIFIC METHOD

made of 2 steps:
1) developing MODELS that explain some part of world

2) TESTING those models using DATA to see how closely model matches what we actually observe

2 important features of models? ❌

1. they ARENT exact

2. they generate PREDICTIONS that can be tested w data

what happens when the range of incomes is skewed?

the mean ISNT an accurate measure

MEDIAN 🖕

middle point of data

MEAN

average

CAUSATION ➡

when one thing DIRECTLY affects another

example of causation? 😪

pulling an all nighter = tired

CORRELATION

when 2 things are related

POSITIVE CORRELATION 📈

they both change in SAME direction

NEGATIVE CORRELATION ◀ ▶

they change in OPPOSITE directions

SPURIOUS CORRELATION

related statistically and thats their ONLY relation

why isnt correlation the same as causality?

1. omitted variables

2. reverse causality

OMMITTED VARIABLES 👻

if we IGNORE something that contributes to cause and effect

a correlation might not make sense until OV is added

REVERSE CAUSALITY 🤔

when theres cause and effect BUT goes opposite form what we thought

how can we tell the difference bw CAUSALITY and CORRELATION?

thru experiments

types of experiments? 2⃣

1. controlled

2. natural

CONTROLLED EXPERIMENTS

subjects are RANDMOLY put into treatment and control groups by researcher

whats the problem with controlled experiments? 😩

difficult to do w economics studies

NATURAL EXPERIMENTS

subject ends up in treatment/control groups due to something that ISNT purposefully det. by researchers

CONTROL GROUP ❌

nothing happens

TREATMENT GROUP ✅

something happens

example of CONTROL group?

students reaching age 14 before 1947

examples of treatment group?

students reaching 14 in 1947 or after

slope formula

m = rise/run