Unit 1 - 1.4 The method of economics

Question 1

Positive economics

Answer 1

Positive economics is concerned with objective statements of how a market or an economy works

based on empirical evidence and tend to be statements of fact

They can be proven to be true or false

Question 2

Normative Economics

Answer 2

Normative economics focuses on value judgements

These judgements are built around opinions and beliefs as to what the best economic policies or solutions may be

often the basis for the manifestos of political parties and the different economic agendas they put forward

Question 3

Manifesto

Answer 3

A written statement declaring the values, policies and plans of a political party.

Question 4

Logic

Answer 4

A method of reasoning which involves making a series of statements each of which is true if the preceding statements are true

eg

Question 5

Hypothesis

Question 6

Empirical Evidence

Answer 6

Empirical research is collected through observations, surveys, opinion polls etc

Question 7

Theory

Question 8

Equity

Answer 8

the economic fairness in the distribution of resources

Individuals and societies have different views on what is fair and this influences government policy

Question 9

Equality

Answer 9

everyone being equal and having equal recognition

Equality is often a normative concept. When are all people equal? When do people all have equal opportunities?

Question 10

ceteris paribus assumption

Answer 10

Translated from Latin, ceteris paribus means ‘all other variables remain constant’

It allows economists to simplify and explain causes and effects, even if the explanation is somewhat limited by the assumptions