1.1 Economic Methodology Flashcards
Define Ceteris Paribus
-A key assumption that is made is assuming that events occur with ceteris paribus.
-This assumption is that other things are being held equal or constant, so nothing else changes.
Economics is a social science
-Economists cannot conduct scientific experiments, like in the natural sciences, so
models are devised.
-Economists then use real-life scenarios to build these models upon, and assumptions are made with the models.
-It is important to be able to distinguish between fact and fiction in current affairs.
What are positive statements?
-They are objective.
-They can be tested with factual evidence, and can consequently be rejected or accepted.
-Look for words such as ‘will’, ‘is’.
-For example, “Raising the tax on alcohol will lead to a fall in the demand of alcohol and a fall in the profits of pub landlords” is a positive statement.
- “Higher temperatures will lead to an increase in the demand for sun cream” is also a positive statement.
-The key thing here is that these statements can be tested, the results can be
examined and the statement can then be rejected or accepted
What are normative statements?
-Normative statements are based on value judgements.
-These are subjective and based on opinion rather than factual evidence.
-Look for words such as ‘should’, and if the statement is suggesting one action is
more credible than another.
-For example, “The free market is the best way to allocate resources” is a normative statement, because it is based on opinion and suggests one method of resource
allocation is better than another.
- “The government should increase the tax on alcohol” is another normative statement.
What are value judgements?
-Value judgements can influence economic decision making and policy.
-Different economists may make different judgements from the same statistic.
-For example, the rate of inflation can give rise to different conclusions.
What are people’s opinions of the best view influenced by?
-People’s views concerning the best option are influenced by the positive consequences of different decisions and by moral and political judgements.
