Economic methodology and the economic problem

Question 1

why is economics a social science

Answer 1

it looks at the behaviour of humans ethier as individuals or as organisation and how they use scarce resources

Question 2

economic methodology

Answer 2

develop theories and create models

limiting number of variables and simplifying assumptions

test theories against known facts

Question 3

ceteris paribus

Answer 3

all other things remain equal

Question 4

positive statement

Answer 4

objective statements that can be tested by refering to the available evidence

they can test if economic ideas are correct and see if claims are true or false overtime

Question 5

normative statement

Answer 5

subjective statements which contain a value judgement which is an opinion, they influence government policy and decision making

Question 6

basic economic problem

Answer 6

how can the available scarce resources be used to statisfy peoples infinite needs and wants

Question 7

factors of production

Answer 7

land- scarce, renewable, non renewable , water, animals

labour- work done by the workforce

capital- the equipment factories and schools which produce goods and services

enterprise- people who take risk and make things

Question 8

three fundamental questions

Answer 8

what to produce? goods to make a profit,

how to produce? firms want to make a good in a efficient way,

who to produce for? to produce goods for consumers who are willing to pay

Question 9

PPF

Answer 9

production possibility frontier shows the options that are available when you consider the production of two types of goods

Question 10

trade off

Answer 10

when you have to choose between conflicting objectives because you cant achieve all your objectives

Question 11

PPF graph

Answer 11

all points on a PPF are efficient,

points outside a PPF arent achievable,

points inside a PPF are productively inefficient

Question 12

Opportunity cost

Answer 12

the next best alternative that you give up in making a decision