1.1.2 positive and normative statements

Question 1

Positive statements

Answer 1

are objective and can be tested against evidence to see whether they are true or false

Question 2

Example of a positive statements

Answer 2

The earth is flat
More accidents occur on Friday the 13th than on any other day

Question 3

Normative statements

Answer 3

are subjective statements that contain value judgements and cannot be scientifically tested, falsified or verified. Value judgements contain opinions and are lacking in objectivity

Question 4

Example of normative statements

Answer 4

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

Question 5

What to look out for with normative statements

Answer 5

ought” or “should”

Question 6

Production

Answer 6

involves the conversion scarce resources into finished goods and services

Question 7

Distribution

Answer 7

refers to the movement of the raw resources or the finished goods and services to points of production and consumption

Question 8

Exchange

Answer 8

refers to any monetary or non-monetary transaction between a producer and a consumer

Question 9

Consumption

Answer 9

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)

Question 10

Primary sector

Answer 10

activity – the extraction of resources in their rawest form

Question 11

Secondary sector

Answer 11

activity – the processing and manufacturing of these resources into goods and services

Question 12

Tertiary sector

Answer 12

activity – the provision of services and the distribution and exchange of goods

Question 13

A “need”

Answer 13

is something that is necessary for survival e.g. food, heat, shelter

Question 14

A “want”

Answer 14

is something that is desirable but not strictly necessary for survival e.g. a smartphone or sprinkly doughnut

Question 15

“economic goods”

Answer 15

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.

Question 16

“free good”

Answer 16

Any good that involves no scarce resource with alternative uses would be described as a free good

Question 17

What to produce?

Answer 17

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.

Question 18

How to produce it

Answer 18

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.

Question 19

For whom to produce

Answer 19

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.