Topic 1 - Economic Methodology and the Economic Problem Flashcards
What are the different types of economic decisions?
- Normative Statements (Peoples opinions e.g. income should increase)
- Political Judgements (E.g. lowering taxes may win votes for a government)
- Moral views and Value judgements (Opiniated statements e.g. the view that people shouldnt live in poverty and that wealth should be shared)
- Short term positive consequences of a decision, regardless of long term consequences (e.g. reducing taxes may win an election, but it will reduce the governments income and may lead to public spending cuts)
What is the meaning of scarcity ?
The idea that, Our wants and needs are greater than the amount of available resources. This is because resources and raw materials are needed to produce these goods and services, but they’re limited in supply.
What are normative statements?
They contain value judgements and views (since everyone has a different opinion about whats right and wrong, normative statements cannot be scientifically tested)
Information about normative statements?
They are important as the value judgements influence decision making and government policy
Normative statements usually contain the words:
- ought
- should
- better
- worse
What are positive statements?
They can be scientifically tested to see if its correct or incorrect, if a positive statement doesnt pass the test then it is falsified
a positive statement does not have to be true
They are divided into 2 categories:
- Hypothesis e.g. Unemployment us caused by a decrease in GDP
- Statements of Fact e.g. Microsoft is the largest producer of computer operating systems in the world
What are the impacts of moral and political judgements?
Government ministers make value-based judgements when deciding on economic policies
There will always be winners who gain and losers who suffer because of government policy decisions
What is a need?
Its something that people must have, something that they cannot do without e.g. food
What is a want?
Its something that people would like to have but isn’t essential for survival
What is economic welfare?
Its the economic well being of an individual or group with society, or an economy (the happiness of people)
What is the Basic/ Fundamental Economic Problem?
There are scarce resources but humans have unlimited wants and needs
What happens when peoples wants and needs are satisfied?
It means improving economic welfare
What are the 3 Key/ Basic/ Fundamental economic questions in economics?
WHAT to produce
HOW to produce
WHOM to produce for
