What Is a Good Theory

question 11

Multiple Choice

What is a good theory?  

• A) one that is widely accepted 
• B) one that starts from realistic assumptions 
• C) one that helps us to understand the world better 
• D) one where no logical mistakes were made in developing it

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Definitions:

Substitution Effect

Alterations in spending behaviors triggered by variations in the prices of goods relative to each other, prompting individuals to replace one item with an alternative.

Output Effect

The change in total output resulting from adjusting production levels, typically in response to changes in market demand or cost of production.

Fixed Proportions

A production process where inputs must be used in specific proportions, and the ratio of inputs cannot be easily changed.