Economic methodology

Question 1

Scarcity

Answer 1

Scarcity means that our wants and needs are greater than the amount of available resources. This is because resources and raw materials are needed to produce these goods and services, but they are in limited supply.

Question 2

Economic decisions are based on:

Answer 2

• Political decisions
• short-term outcomes
• moral judgements
• normative statements

Question 3

Short-termism

Answer 3

The choices a politician makes may be motivated by short term gain.
But this decision may not lead to the best outcome in the long term.
Examples of short-termist policies include:
Lowering income tax today.
Promising to remove university tuition fees.
Paying staff higher wages now.

Question 4

positive statements

Answer 4

Positive statements describe the world as it is. They are objective statements that can be proved.

Question 5

Normative statements

Answer 5

Normative statements describe how the world should be. They are opinions that contain value judgements

Question 6

Value judgments

Answer 6

Value judgments are often found in normative statements. They are judgements about society that cannot be quantified and tested.

Question 7

Types of economic decision

Answer 7

Business
individual
societal
family

Question 8

ceteris paribus

Answer 8

all other things being equal