3.1.1.1 economic methodology Flashcards
what is a positive statement
an objective statement which can be tested true or false against facts, usually has a “what is” or “what will”
what is a normative statement
a subjective statement which cannot be tested true or false, it is an opinion and not factual evidence. “what should” or “what ought to be “
what is the difference between a positive and normative statement
positive can be tested true or false and normative cannot be
what is economics
it is a social science
what is a need
something humans need in order to survive
what is an example of a human need
food, clothes, warmth
what is a want
something not needed to survive but people feel improves their life
what is an example of a human want
iphone, new car,designer clothes
why is economics considered a social science
because it looks at the behaviour of humans
how is economics similar to other sciences
-it tests theories using relevant known facts
-is uses models to make predictions
-it develops theories
how is it different to other sciences
-it cant conduct controlled lab experiments where only one variable is changed at a time
ceteris paribus
all other things remaining equal
rational behaviour
a theory of economics that assumes that individuals always make decisions that provide them with the highest amount of personal utility
what do consumers try to maximise
satisfaction, they spend their income to buy a combination of goods which provide the highest level of satisfaction
what do firms try to maximise
profit, they produce goods and services which yield the highest possible level of profit
