Economic methodology and the economic problem Flashcards
What is a key assumption of economists
That everything happens ceteris paribus
Why must economists models be used instead of experiments
They cannot conduct experiments so models are made and assumptions are concluded
What is a positive statement
They are objective and can be tested with factual evidence to be accepted or rejected
Give an example of a positive statement
The unemployment rate in France IS HIGHER than in the United states
What is a normative statement
They are subjective and are based on opinion instead of evidence
Give an example of a normative statement
The government SHOULD increase tax on alcohol
What is the economic problem
There isnt enough supply to satisfy consumers needs and wants
What are the four factors of production
Capital
Entrepreneurship
Land
Labour
Describe Capital as a FoP
Physically:goods which can be used in the production process
Fixed:Machines
What is the economic problem with the environment
It us a scarce resource
What does the Worldwide Fund for Nature claim about global demand
Two planets will be needed to meet the demand by 2050
How is scarcity an economic problem
Wants are unlimited but resources are finite
Define opportunity cost
The value of the next best alternative forgone.
Give an example of opportunity cost
Having £1 and wanting crisps and chocolate but you can only afford one so you lose out on the ohter
Give a real life example of opportunity cost
The goovernment may have to sacrifice NHS funding in order to improve education
