topic 1: economic methodology and the economic problem Flashcards
what is ceteris paribus?
assumption that other things are being held constant or equal so nothing else changed
what are positive statements
objective statements that can be tested with factual evidence and can consequently be rejected or accepted
What are normative statements?
Statements based on value judgments, these are subjective and based on opinion rather than factual evidence
what are value judgments
Judgments about society that cannot be quantified and tested
What are the factors of production?
Capital
enterprise
land
labor
What are renewable resources
Resources that can be replenished so the stock level of the resources can be maintained over a period of time
what are non-renewable resources
Resources that cannot be renewed
what does scarcity mean?
Are once and needs are greater than the amount of available resources
what is opportunity cost?
The opportunity cost of a choice is the value of the next best alternative forgone
3 fundamental choices that need to be made of how to allocate scarce resources
- what to produce (based on consumer demand)
- how to produce (based on whats cost wffective)
- for whom to produce ( those with enough income to afford goods and services)
3 main economic agents
- producers
- consumers
- governments
what are trade offs ( they occur on the PPF)
To produce more of one good, you must produce less of another
How is economic growth shown on a PPF
An outward shift of the curve
how is economic decline shown on a PPF
An inward shift of the curve
The original curve drawn on a PPF is drawn, assuming…
-a fixed amount of resources are used
-there is a constant state of technology
