1.1.1 Economics as a Social Science + 1.1.2 Positive and normative economic statements

Question 1

Why is economics a social science?

Answer 1

It studies society and relationships between people, it uses the scientific method as the basis for investigation.

Question 2

Economics is the study of what?

Answer 2

How groups of individuals make decisions about the allocation of scarce resources

Question 3

Why do economists develop models and theories?

Answer 3

To help explain the choices we make in our daily lives. Or in other words economic interactions. These models are assumptions.

Question 4

What are assumptions?

Answer 4

initial or prior conditions made

Question 5

Positive statements are….

Answer 5

testable, they can be supported or refuted with evidence

Question 6

An example of a positive statement would be… why?

Answer 6

“There are fairies in my back garden” as it can be proven wrong

Question 7

Positive economics is…?

Answer 7

the scientific or objective study of the subject

Question 8

Normative statements are…

Answer 8

untestable

Question 9

An example of a normative statement would be… why?

Answer 9

“I believe in fairies” as it can’t be proved wrong, it is a value judgement, it can’t be supported or refuted

Question 10

Normative economics is?

Answer 10

concerned with value judgements

Question 11

ceteris paribus

Answer 11

‘all other things remaining equal’
the assumption that even though effects of a change are being investigated, the other variables have to remain constant

Question 12

Economic theories and models have to be simplifications of reality… why?

Answer 12

because simplification implies some factors have been included in the model and that some haven’t been

Question 13

What is the difference between a theory and a model?

Answer 13

theories are expressed in words, models are expressed in mathematical terms

Question 14

The scientific method

Answer 14

1) scientist postulates a theory and develops a hypothesis using ceteris paribus
2)gathers evidence and conducts empirical research
3) accepts, modifies or refutes the theory
Theories that gain universal acceptance become ‘law’ if the relationship between two variables is proven.

Question 15

Why is there an inability to make economic scientific experiments

Answer 15

due to the complexity of human nature and the significant number of social interactions that are taking place in any economy at any given point in time

Question 16

Law

Answer 16

a theory or model verified by empirical evidence

Question 17

Normative economics

Answer 17

the study and presentation of policy prescriptions involving value judgement about the way in which scarce resources are allocated

Question 18

Positive economics

Answer 18

the scientifc or objective study of the allocation of resources

Question 19

What are the role of value judgments in economic decision making

Answer 19

1) Economic decisions often involve choices influenced by individual or societal values.
Policies such as taxation, subsidies, and regulations are shaped by value judgments.

Example: A government may implement progressive taxation to address income inequality based on a value judgment that reducing inequality is desirable.

2. Conflicts in Values

Different people and groups may hold conflicting values, leading to debates over economic policies.
Example: Environmental policies may clash with economic growth goals, as stricter regulations might slow economic development.

3) Public Opinion and Economic Policy

Public opinion, shaped by values and beliefs, can influence government policies.
Policymakers may align their decisions with prevailing values to gain public support.
Example: A government may increase funding for education in response to public demand for improved access to quality education.

4. Ethical Considerations

Ethical considerations play a role in economic decisions and policies.
Decisions on resource allocation, distribution of wealth, and environmental protection often involve ethical judgments.
Example: Deciding how to allocate limited vaccine doses during a pandemic involves ethical questions of fairness and saving lives.