1. Economic Methodology And The Economic Problem Flashcards
What are positive economic statements?
Objective statements that can be tested against facts to be declared either true or false. However, they don’t necessarily need to be true.
What are normative economic statements?
Subjective opinions or value judgements that cannot be tested against facts. These can often concern views on individuals, firms or the government should do, based on peoples ethical, moral, or political standpoints.
What is economic policy?
A policy which rests on normative judgements about the ‘right’ levels of, taxes, minimum wages, or the amount of government intervention in the markets.
What is a typical mistake concerning positive statements?
They do not necessarily need to be true. It simply needs to be capable of being tested to be declared true or false.
What is a ‘need’?
Something that humans require to survive, such as food, shelter, and warmth.
What is a ‘want’?
Something not essential to survival, but which people feel improves their standard of living, or economic welfare, eg. A new car.
What is economic welfare?
The standard of living, or general well-being of individuals in society.
What leads to an increased economic welfare?
Satisfying society’s needs and wants in terms of material and non-material things.
What leads to an increased economic welfare?
Satisfying society’s needs and wants in terms of material and non-material things.
What are the four factors of production?
- Captial
- Enterprise
- Land
- Labour
What is capital?
Man-made physical equipment, used to make other goods and services, eg. Machinery and computer equipment.
What is enterprise?
Entrepreneurs are individuals who take a business risk in combining the other three factors of production in order to produce a good or service.
What is land?
All naturally occurring resources such as minerals, the sea, fertile land and the environment. These can be further divided into renewable and non-renewable resources.
What is labour?
People that are involved in production, sometimes referred to as human capital.
What is money called as?
Financial capital
What does CELL stand for?
Capital, Enterprise, Land, Labour
What is the basic economic problem?
Scarce economic resources compared with society’s unlimited wants.
What are the three fundamental economic questions?
What to produce and in what quantities?
How should goods and services be produced?
To whom should goods see services be allocated?
What is a consumer good?
Those that give satisfaction to the consumer, eg. pizza.
What are capital goods?
Those that are used to produce other goods, eg. Machinery and IT equipment.
What is the basic production decision between?
Labour-intensive methods (where a high proportion of human capital is used compared to capital)
Capital-intensive methods (where a high proportion of capital is used compared to human capital)
What determines who in society gets what?
The free market or capitalist economy and/or the command or centrally planned economy.
What is the free market or capitalist economy?
Decisions are made solely by the interactions of consumers and firms, with no government intervention.
What is the command or centrally planned economy?
Decisions are made solely by the planning department of governments.
