The Economic Problem and Methodology

Question 1

What is the economic problem?

Answer 1

Scarce resources, unlimited wants

Question 2

Difference between positive and normative statements

Answer 2

• Positive: Factual, can be tested.
• Normative: subjective/opinionated, cannot be tested, involves value judgement

Question 3

What is economic methodology?

Answer 3

Using models and assumptions to simulate real world scenarios and deduce consequences.

Question 4

Draw and Explain a PPf Diagram

Answer 4

Concave curve, occurs due to diminishing returns from some fixed factors of production.

Question 5

Define opportunity cost

Answer 5

The next best option forgone by making a decision