4.1.1 Economic Methodology

Question 1

What is a social science?

Answer 1

One that studies human behaviour, in particular, economics studies how we manage resources

Question 2

What is a Positive Statement?

Answer 2

Those that can be tested against evidence – This doesn’t mean it will always hold true, just that you can test it

e.g The CPI in the UK is 2%

Question 3

What is Normative Statement?

Answer 3

Those that are subjective or carry a value judgement

e.g. The government has the countries best interests at heart

Question 4

What is the Economic Problem?

Answer 4

We have unlimited wants and needs, but limited resources - leading to scarcity

Question 5

Name the 4 Factors of Production

Answer 5

Capital, Enterprise, Land and Labour (CELL)

Question 6

What does a PPF diagram depict (micro)?

Answer 6

The maximum productive potential of an economy, using 2 goods/services, when resources are fully and efficiently employed

Question 7

What causes the PPF to shift outward/inward?

Answer 7

General increase/decrease in the quality of quantity of the Factors of Production

Question 8

On the PPF, what term is given to the idea that producing more of Good X reduces the amount of Good Y that can be produced?

Answer 8

Opportunity cost

Question 9

What is productive efficiency?

Answer 9

When the maximum output is being achieved from the available resources

• this occurs anywhere along the PPF curve, as all available resources are utilised

Question 10

What is allocative efficiency?

Answer 10

Where resources are allocated in the combination which best matches societies preferences

• we don’t know where this falls on the PPF curve