4.1.1 - Economic Methodology & The Economic Problem Flashcards
Ceteris Paribus Assumption
Economists isolate the relationship between two variables by assuming Ceteris Paribus - all other influencing factors are held constant
What are Positive Statements?
Objective statements that can be tested, amended or rejected by referring to evidence
What are Normative Statements?
Subjective statements that carry value judgements
What is the purpose of Economic activity?
To produce goods and services which satisfy customer needs and wants
What are the main economic questions?
What to produce
How to produce it
Who will benefit from the goods & services produced
State the Factors of Production
Land
Labour
Capital
Enterprise
Need
Something you must have in order to survive e.g. food, water
Want
Someone that you would like to have but is not essential for survival
Land
Natural resources e.g. oil and coal
Labour
Human capital - the workforce of the economy
Capital
Physical or financial resources used to produce value in an economy
Enterprise
The ability to utilise the factors of production effectively
What type of resource is the environment?
Scarce resource
Made up of Renewable and non-renewable resources
Opportunity cost
The cost of the next best alternative foregone when a choice is made
What is the basic economic problem?
Scarcity
Unlimited wants but finite resources, so choices must be made
