Week 1 - nature of economics Flashcards
What is a Social Science?
A study of human behaviour and interaction
What is an Economic Model?
An Economic theory or collection of theories
which allows us to simulate situations. They are simplified versions of the world
Why do Economists use Models?
To simplify the world around us
What does ceteris paribus
mean?
All other factors equal
Why is it difficult for Economists conduct scientific experiments?
Humans are unpredictable and varied
What is a positive statement?
An assertion that is objective and testable
(although not necessarily true)
What is a normative
statement?
An opinion which is subjective and contains value judgements
Which 3 questions does the
study of economics seek to
answer?
What to produce? How to produce? For whom to produce?
What does ‘scarcity’ mean?
A limited, finite amount
What is meant by a ‘renewable resource’?
A resource for which the stock level can be
replenished naturally over time
What is meant by a ‘nonrenewable resource’?
A resource for which the stock level cannot be replenished naturally over time
What is the Economic
Problem?
Infinite wants but limited resources
What are the 4 factors of
production?
Land, labour, capital, enterprise
What is the reward for
enterprise?
profit
What is the reward for
Capital?
interest
What is the reward for Land?
rent
What is the reward for
Labour?
wages
Why do opportunity costs
exist?
Scarcity. Since we cannot have everything, we must make decisions
Give an example of an
opportunity cost for a
consumer
When buying a new TV, the consumer foregoes
spending that money on a smartwatch
Give an example of an
opportunity cost for a firm
By spending £1000 on a marketing campaign, the
firm forgoes the benefits of spending that money
on capital investment
Give an example of an
opportunity cost for a
Government
By spending on NHS, the government foregoes
the benefits of spending that money on education
