ECONOMIC METHODOLOGY AND THE ECONOMIC PROBLEM Flashcards
what is a normative statement?
one that includes a value judgement and cannot be refuted by looking at evidence.
It is based on opinion and cannot be scientifically tested.
what is a positive statement?
a statement of fact that can be scientifically tested and can be proven to be correct or incorrect.
what is the basic economic problem?
scarcity - unlimited wants but finite resources
what is an economic good?
goods which are scarce. They have an ‘opportunity cost’ in production and consumption.
what is a free good?
a good that is not scarce and we do not produce it. There is little or no opportunity cost.
what is demand?
consumer’s desire to purchase goods and services and WILLINGNESS to pay a specific price for them.
what is supply?
the quantity of a good or service that producers are willing and able to supply at a given price in each time period.
what are the economic agents of demand?
Consumers
Firms
Governments
what the four factors of production? (CELL)
C apital
E nterprise
L and
L abour
what is capital?
man made resources, which are used in the production of other goods/services.
what is enterprise?
the willingness to take a risk and make a profit.
what is land?
natural resources
what is the financial reward for capital?
Interest from the investment
what is the financial reward from enterprise?
profit - incentive to take risks
what is the financial reward for labour?
wages
