2. Economic Model vs. Economic Theory (2).pptx

8/17/2019 2. Economic Model vs. Economic Theory (2).pptx

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Economic Modelvs. Economic

TheorySam D. FuegoSocial Sciences Department

School of Liberal Arts

Ateneo de Zamboanga University


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Economic ModelsEconomic models provide a ay to render

some aspects of an economy less comple!than it really is.

Models are not themselves the truth" but theyare engines for discovering the truth.

#hey help economists identify the causes and

e$ects" e!plain economic phenomena" andma%e useful economic prediction.


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&ont.Model is a formal statement of an economic

theory.

#he most common ay of e!pressing theseare in ords" graphs" and in e'uations.E'uation()d! * f +,!-


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Economic theorys not a fact or la hich has been proven.

s an attempt to establish predictive

relationships from observed facts.f a theory says that one event alays follos

another" and if e!perience shos that noe!ceptions to this ever occur" then" it be

regarded as a la.


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Microeconomics vs.

MacroeconomicsMicroeconomics deals ith the economic

behavior of individual units such asconsumers" /rms" and resource oners.

Macroeconomics deals ith the behavior ofaggregates such as 0ross 1ational ,roduct

+01,- and the level of Unemployment.


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Methodology( #he Scienti/c

ApproachEconomics deals ith hat is2 3 positive

economics.

#his is in contrast ith normative economics,hich deals ith hat should be2

#o be able to understand and e!plaineconomic events and economic theories" the

student of economics must learn ho to usethe basic tools of economics.


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4asic tools of economicsFirst" he has to learn ho to apply logic in order

to enable him to reason out properly and to allo

conclusions.Second" use of Mathematics ill enable him to

conceptuali5e and 'uantify economic principles.

#hird" use of Statistics ill enable him to describe

'uantitatively human behaviors and to serve asempirical evidence in the testing of hypothesis. #hese tools e'uip student of economics to approach

the sub6ect in a scienti/c approach.


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Economic Logicnductive,articular to general

Deductive0eneral to particular


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Scienti/c approach

7 b s e r v a t i o n • A n e c o n o m i s t s h o u l d b e a b l e

t o r e c o g n i 5 e c o n d i t i o n s " b e h a v i o r s a n d e v e n t s i n t h e e n v i r o n m e n t .

A s s u m p t i o n s • 8 e s h o u l d b e a b l e t o d e s c r i b e t h e

s p e c i / c u s e s o f t h e s t u d y a n d p e r i p h e r a l c o n d i t i o n s h i c h a $ e c t t h e e c o n o m i c b e h a v i o r s h i c h a r e b e i n g s t u d i e d .

D e d u c t i o n s a n d

E m p i r i c a l t e s t i n g • # h e s e a r e h y p o t h e s i s o r

t h e o r i e s p r e s e n t e d f o r e m p i r i c a l v a l i d a t i o n . # h e y a r e t e m p o r a r y c o n c l u s i o n s m a d e b a s e d o n o n e 9 s o b s e r v a t i o n s a n d a r e s t i l l s u b 6 e c t t o t h e p r e s e n t a t i o n o f e v i d e n c e .

• D e d u c t i o n s h a v e t o b e t e s t e d

a s t o t h e i r v a l i d i t y a n d c o r r e c t n e s s . # h e p r e s e n t a t i o n o f t h e e m p i r i c a l e v i d e n c e i l l b e t h e b a s i s o f r e 6 e c t i n g o r a c c e p t i n g a h y p o t h e s i s .


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End

2. Economic Model vs. Economic Theory (2).pptx

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