1.1.1 Economic Methodology

Question 1

What is a positive statement?

Answer 1

An objective statement that can be proven or disproven.

Question 2

How is Economics similar to natural science?

Answer 2

• Models and theories are used to explain real world evidence.
• Models use real life data and can be used to make forecasts about the future.
• Statistical analytics can be used to test hypotheses against evidence.
• Nearly all models rely on assumptions and simplifications.

Question 3

How is economics different to natural science?

Answer 3

• Controlled laboratory tests aren’t possible. Economists can’t keep variables constant.
• Economists rely on the ceteris paribus assumption so they assume that only one factor changes and the rest stay constant.

Question 4

What is a normative statement?

Answer 4

A statement that describes how the world should. They are opinions and contain value judgements.

Question 5

What is a value judgement?

Answer 5

They are often found in normative statements. They are judgments about society that can not be quantified and tested.