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Tool of Public Finance positive economics How the economy works What When Why normative economics Whether or not it is producing good result Good/ Better off Bad/ Worse off What ought to be 提问,请准备: 请用预算图表示substitution effect和 income effect,并说明normal/inferior /Giffen good。 请用收入图示意normal/inferior good。 请用收入图示意necessaries 和luxury good. 请用数学表达式说明上述概念。 完全竞争市场(perfect competition)应该具备哪些条件? CHAPTER 2 Tools of Positive Analysis The Role of Theory Economic theory Economic theory helps specify the factors that might affect a given kind of behavior. But, theory alone cannot say how important any particular factor is. The assumption that maximization of utility is taken throughout the book. The Role of Theory Economic models virtue of simplicity judging a model limitations of models Empirical analysis To review: substitution effect income effect normal/inferior/Giffen good Causation vs. Correlation Statistical analysis Correlation Control group Treatment group Conditions required for government action X to cause societal effect Y X must precede Y X and Y must be correlated Other explanations for any observed correlation must be eliminated Experimental Studies Biased estimates Counterfactual Experimental (or randomized) study Conducting an Experimental Study Random assignment to control and treatment groups Pitfalls of Experimental Studies Ethical issues Technical problems Response bias Impact of limited duration of experiment Generalization of results to other populations, settings, and related treatments Black box aspect of experiments Observational Studies Observational study – empirical study relying on observed data not obtained from experimental study Sources of observational data Surveys Administrative records Governmental data Econometrics Regression analysis Conducting an Observational Study L = α0 + α1wn + α2X1 + … + αnXn + ε Dependent variable Independent variables Parameters Stochastic err
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