1.1 Economic methodology

Question 1

Micro econmics is a branch of economics that studies:

Answer 1

• Induvidual markets/decisions

- Supply and demand

Question 2

What does Ceteris Paribus mean?

Answer 2

All other factors remaining the same.

Question 3

Ceteris Paribus - Looking at how the demand for ice cream changes in price, what factors could we hold constant (the same)?

Answer 3

• The weather
• Price
• Diet trends

Question 4

What is a positive statement?

Answer 4

• Can be tested and is factual
• Not influenced by opinion
• Allows scientific testing to take place, can be rejected or accepted

Question 5

What is a normative statement?

Answer 5

Based on opinion

Cannot be tested

Value judgement

Question 6

What is opertunity cost?

Answer 6

The next best alternative that is not picked and lost as a result.
E.g if you had to chose between coke and fanta and you chose coke then fanta would be your opertunity cost.