MICRO: An Introduction To Economics (Economics As a Social Science, Positive and Normative Statements)

Question 1

Why is economics thought to be a social science?

Answer 1

It looks at the behaviour of humans, as either individuals or part of organisations (firms and governments ie), and their use of scarce resources.

Question 2

List how economics’ methodology is similar to that of natural and other sciences (2)

Answer 2

1. They develop theories and create economic models to explain phenomena.
2. Use assumptions to limit the number of variables

Question 3

What is different from natural sciences then?

Answer 3

Economists can’t conduct controlled lab experiments where only one variable is changed at a time. For example, if an Economist examines the impact on price on the demand for cheese, they can’t keep consumers income, constant – in the real world, income won’t remain constant.

Question 4

What is ceteris Paribus?

Answer 4

All other things remaining equal.

Question 5

Why do economists use ceteris paribus?

Answer 5

They use it when they’re looking at the relationship between two factors for example, price and demand. They assume that only these two factors change and all other factors, (For example, income, changes in tastes) that would have an effect on any other variable being considered remain the same.

Question 6

What are positive statements?

Answer 6

Positive statements or objective statements that can be tested by referring to the available evidence.
For example “a reduction in income will increase the amount of people shopping in pound shops.”

Question 7

What are normative statements?

Answer 7

They are subjective statements containing value judgements - opinions.
For example: “The use of fossil fuels should be taxed more highly than the use of renewable fuels.”
You can only agree or disagree.
Value judgements can influence decision making and govt policy e.g politician may wish to increase tax on the rich to redistribute income to the poor