1. Economic methodology and the economic problem - micro Flashcards
Positive statement
A statement of fact that cab be tested scientifically to see if it is correct or incorrect
E.g. words such as ‘would’ ‘is’ etc
Normative statement
A statement that includes a value judgement and cannot be refuted just by looking at the evidence.
E.g. uses words such as ‘ought’ ‘should’ ‘better/worse’ etc
Value judgement
Whether something is desirable or not
Government ministers make value-judgements when deciding on economic policies
Need
Something that is necessary for human survival, such as food, clothing, warmth, or shelter.
Want
Something that is desirable, such as fashionable clothing, but is not necessary for human survival.
Economic welfare
The economic well-being of an individual, a group within society, or an economy.
Economic system
The set of institutions within which a community decides what, how and for whom to produce.
Market economy
An economy in which goods and services are purchased through the price mechanism in a system of markets.
Command economy (also known as planned economy)
An economy in which government officials or planners allocate economic resources to firms and other productive enterprises.
Mixed economy
An economy that contains both a large market sector and a large non-market sector in which the planning mechanism operates.
E.g. countries in Western Europe such as UK
Production
Converts inputs or factor services into outputs of goods and services.
Capital good (producer good)
A good which is used in the production of other goods or services
E.g. equipment, machinery, technology
Consumer good
A good which is consumed by individuals or households to satisfy their needs or wants.
Factors of production
Inputs into the production process: land, labour, capital and enterprise.
Renewable resource
A resource, such as timber, that with careful management can be renewed as it is used.
