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algebraic model
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simplification that shows the relationship between two or more variables with an equation
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assumption
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something that is taken as or thought to be true
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behavior assumption
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an assumption about how people will act; e.g. economists assuming that people act to pursue their own self interest
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ceteris paribus
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Latin phrase meaning "all other things held constant"; controlling all variables but the one being tested when conducting an experiment
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fallacy of composition
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the incorrect belief that what's good or true for an individual is good or true for the group
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fallacy that association is causation
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the incorrect belief that because two things happen at about the same time, one caused the other
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faulty ceteris paribus
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the incorrect assumption that variables are constant when they are not
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graphical model
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a simplification of the relationship between two or more variables, shown on a graph
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hypothesis
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a statement about how two or more variables interact; first step of the scientific method; must be tested and shown to be true before becoming a theory
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law
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a theory that's been repeatedly tested and shown to be true; not indisputable--could conceivably be proven untrue
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law of demand
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the law that says the amount of people willing and able to purchase increases when price decrease, and the amount of people willing and able to purchase decreases when price increases, ceteris paribus
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mistake of ignoring secondary effects
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the mistake of not noting changes in other variables when the variable being studied changes
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mistake of ignoring unaccounted variables
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overlooking changing variables that may be responsible for the change of other variables
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model
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the representation of a theory
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numerical model
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a simplification showing the relationship between two or more variables using numbers in a table
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Phillips curve
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a curve that shows the short-run negative (or inverse) relationship between unemployment and inflation
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random measurement error
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differences in measurements that occur when measuring the same object more than once
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sample selection bias
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when a smaller sub-section of a group is used to represent the group as a whole for statistical purposes, but doesn't share the characteristics of the group as a whole
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scientific method
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a four-step process used by all scientists (including economists, who are social scientists); four steps are identifying and defining key variables, specifying assumptions, developing a hypothesis, and testing the hypothesis
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secondary effects
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the effects other than the expected primary effects caused by the change of a variable; tend to occur later and with less intensity than primary effects
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social science
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study of people and their behavior
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theory
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an explanation of how two or more variables interact; a hypothesis that's been tested and not rejected; when it has a lot of evidence supporting it, it may be called a law
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variable
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something that changes
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verbal model
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a verbal simplification explaining the relationship between two or more variables
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