1.2 Economic methodology Flashcards
Why is economics considered a social science?
It studies human behavior and decision-making in relation to scarce resources.
What are the two types of economic statements?
- Positive Statement
- Normative Statement
What is a positive statement?
A statement that is verifiable by proven data, facts that you can test whether they are true of false
What is a normative statement?
A statement that expresses an opinion or judgement. They cannot be proven and do not contain facts
What is the definition of ceteris paribus?
All else remains constant
What are the 4 time frames in economics?
- very short run
- short run
- long run
- very long run
What is the very short run?
All factors of production are fixed and nothing can be changed
What is the short run?
1 factors of production is fixed
What is the long run?
all factors of production are variable
What is the very long run?
All factors of production are variable, including technology, political institutions and social change etc.
Why do economists use assumptions?
They simplify reality to focus on key relationships
Identify if this statement is positive or normative: “Unemployment is higher in rural areas than in urban areas.”
Positive – it can be tested with data.
Identify if this statement is positive or normative: “The government should provide free healthcare for all citizens.”
Normative – it is based on a value judgment.
