Economic Methodology 4.1 Flashcards
Positive Statement
They are objective statements that can be tested, amended or Rejected by referring to available evidance
Normative Statement
They are subjective statements e.g. hey carry value judgement about what ought to be
State the types of agents
- Rational consumers
- Producers/ Firms (Businesses)
- Government
Rational consumers
Wish to maximise their satisfaction/ welfare or utility from consumption by correctly choosing how to spend there limited income
Producers/ Firms (Businesses)
Wish to maximise profits by producing at lowest cost the goods and services that are desired by customers
Government
Wish to improve the economic and social welfare of citizens
Types of Economics
- Free market Economy
- Command Economy
- Mixed Economy
What is a Free Market Economy
It is an economic system based on supply and demand with little r no government control
Example of places with FreeMarket Economy
UK, US, EU, Japan
What is a Command Economy
It is when the centralised government controls the means of production and determines output levels
Examples of Command Economy
China, Russia, Cuba
What is a Mixed Economy
It is an Economy organised with some free market elements and some socialistic elements
Examples of Mixed Economy
Most countries are mixed economies
What are Microeconomics
The study of economics at the level of the individual firm, industry or consumer.
How can micro economics be study
Can be studied by How prices and wages are determined in markets also by how consumers decide what to buy
What are some examples of microeconomics
Some are Market failure in health care and price discrimination in air line tickets
What are Free Marketers
Is when some people believe the market forces should allocate resources in society
What are Interventionists
Is when others believe that governments should have a more prominent role in allocating resources within society
What are opportunity costs
Opportunity cost measures the cost of a choice made in terms of the next best alternative foregone or sacrificed
Example of opportunity costs
When the government spends £10 billion on the NHS when the £10 billion could have been spent on National defence and Education
What are the factors of production
Land
Labour
Capital
Enterprise
What is the role of the state in a mixed economy
State Owned industries - Businesses wholly or part state owned
Welfare state - Broad range of welfare benefits, Universal and means tested
Government spending on public services - Spending on Education nd health care, Capital spending on infrastructure
What are the different ways of Rationing Scarce resources
- Market price
- Consumer Income
- Assessment of needs
- Household postcode
- Education level
- Age
- Gender
- Nationality
What are capital goods
Goods that are used to make consumer goods and services, Capital inputs include fixed plant machinery, hardware, software, new factories and other buildings
