chapter 1 micro: economic methodology and the economic problem Flashcards
why is economics a social science
it studies the economic behaviour of individuals and groups
what is the full process of a study/hypothesis on consumer behaviour
- scientists observe consumer behaviour
- hypothesis is formed
- predictions are developed
- evidence is used to test predictions
- either supports or doesn’t support hypothesis and is either used as a theory or scrapped or ammended
what is a positive statement
they are objective and can be tested scientifically (can be incorrect and proven wrong)
what is a normative statement
they are subjectiveand express a more ethical opinion. they cannot be scientifically tested
what is the fundamental economic problem
that there are limited resources and unlimited needs and wants so we need to find a way to allocate the resources
what is improving economic welfare
satisfying people’s needs and wants
what is a planned economy
when the decisions about what, how much and for whom to make products for are all made by the government
do planned economy countries have a large public or private sector
public
what is a market economy
when consumers and producers make decisions independently, according to self interest and with minimal government intervention
what happens when there is competition in market economies - why?
it keeps prices low but the quality is good because they want people to choose their product
describe a mixed economy
when the government controls some prices via taxes, and provides public goods and services
but there are also competition which is fair and ensures safe standards for consumers and workers
what are the factors of production
land
labour
capital
enterprise
reward of land
rent
reward of labour
wages
reward of capital
interest
