1.1.2 positive and normative statements Flashcards
Positive statements
are objective and can be tested against evidence to see whether they are true or false
Example of a positive statements
The earth is flat
More accidents occur on Friday the 13th than on any other day
Normative statements
are subjective statements that contain value judgements and cannot be scientifically tested, falsified or verified. Value judgements contain opinions and are lacking in objectivity
Example of normative statements
Crisps are tastier than sweets
A hot day is preferable to a cold day
The government should aim to eliminate the National Debt by next Friday
What to look out for with normative statements
ought” or “should”
Production
involves the conversion scarce resources into finished goods and services
Distribution
refers to the movement of the raw resources or the finished goods and services to points of production and consumption
Exchange
refers to any monetary or non-monetary transaction between a producer and a consumer
Consumption
describes the using up of a good or service by a consumer in order to gain satisfaction or “utility”. It is the opposite of production (a form of economic destruction)
Primary sector
activity – the extraction of resources in their rawest form
Secondary sector
activity – the processing and manufacturing of these resources into goods and services
Tertiary sector
activity – the provision of services and the distribution and exchange of goods
A “need”
is something that is necessary for survival e.g. food, heat, shelter
A “want”
is something that is desirable but not strictly necessary for survival e.g. a smartphone or sprinkly doughnut
“economic goods”
if they involve the use of a scarce resource that has an opportunity cost. As a society we have to find a way of rationing our scarce economic goods.
“free good”
Any good that involves no scarce resource with alternative uses would be described as a free good
What to produce?
there are not enough resources to meet all the needs and wants of consumers. An economic system must find a way to allocate resources to the provision of the goods and services most in demand by individuals and households.
How to produce it
goods and services can be produced in different ways using different combinations of land, labour, capital and enterprise. An economic system must find the most efficient way to combine scarce resources to produce finished output.
For whom to produce
Once all the goods and services have been produced it is necessary to find a way to distribute or ration this output amongst all the individuals who would wish to consume.
