4.1.1 Economic methodology and the economic problem Flashcards
Why is economics a social science?
It studies human behaviour, particularly how individuals and groups allocate scarce resources
What is microeconomics the study of?
Microeconomics is the study of individual markets and their participants
What is an economic agent
An economic agent is someone who makes an interesting economic decision. Firms and consumers are the main economic agents in AS Economics
What is the difference between positive and normative statements
positive economics - which make positive statements about what will happen, and
normative economics - which make normative statements about what ought to happen.
Define a positive statement
A statement that does not include a value judgement and can be tested against the facts or
evidence.
Define a normative statement
A statement that includes a value judgement and cannot be refuted just by looking at data or
evidence.
Define a value judgement
A view about what is right or wrong, good or bad in a moral sense. Statements that include
value judgements often, but not always, contain the words ‘should’ or ‘ought’.
Define allocative efficiency?
When economic resources are utilised to produce the combination of goods and services that maximise economic welfare
What is allocative price function
Prices allocate resources away from markets with excess supply to markets with excess demand
What is a consumer good
Goods consumed by individual and households used to satisfy needs and wants
What is economic welfare?
The economic satisfaction of individuals/household in an economy
What are the factors of production
Inputs of the production process
Land, Labour, Capital, Enterprise
What is a finite resource
Non-renewable resource that becomes increasingly scarce
What is the fundemental economic problem
Decicing how to best allocative scar resources to maximise overall economic welfare
