1.1/2/3 The nature of economics. Flashcards
What is the difference between Macroeconomics and Microeconomics?
-MACROECONOMICS focuses on the whole economy
eg unemployment, minimum wage
-MICROECONOMICS focuses on specific parts like firms, consumers, markets.
How are the prices in the markets influenced?
PRICES GO UP- when supply decreases and when demand goes up.
PRICES GO DOWN- when supply increases and demand goes down.
What is a model and how can it be used in economics?
A MODEL is a simplified representation of reality.
it Is used to provide insight into economic decision.
What are the uses of economic models?
- Can be used to make predictions on what will happen in an economy when a variable changes.
- Can be used to describe what has taken place in the past.
- can be a simplified version of reality, with a small number of variables, so can represent what will happen when a variable is changed.
What is a principle that used in modelling?
Ceteris Paribus- a latin phrase for ‘other things the same”
When all variables are kept the same except one.
So the outcome is based on that changing variable
What are the two types of statements in economics and how are they different?
A POSITIVE STATEMENT- one that is based on a fact and is testable and refutable.
A NORMATIVE STATEMENT- Is one that is based on judgement and is “ought to be right”
What is scarcity?
SCARCITY- is the situation that arises when there are limited resources and unlimited needs.
What are the two types of goods?
economic goods- that have a limited supply and are finite.
free goods- that are in infinite supply.
What is opportunity cost?
The option that is forgone when making a decision ; the next best alternative.
