4.1.1.1 Economic methodology Flashcards Preview

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Flashcards in 4.1.1.1 Economic methodology Deck (14)
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1
Q

Why is economics considered a social science?

A

Because it looks at the behavior of humans and their use of scarce resources.

2
Q

In what way is economic methodology similar to other sciences?

A

The use of simplifying assumptions such as ceterus paribus, and the testing of theories and models against relevant known facts.

3
Q

What is ceteris paribus?

A

“All other things remaining equal” is a assumption used to make looking at the relationship between two factors easier.

4
Q

What is a normative statement and give an example.

A

A normative statement is one that contains a value judgement, an opinion. An example is “The use of cars should be banned.”

5
Q

What is a positive statement and give an example.

A

An objective statement that can be tested against facts. An example would be “500 people die every year to sharks” it does not matter if its true or not.

6
Q

What are three things someone might base a decision on.

A

Moral views, short term positive consequences and political judgement.

7
Q

How might a decision be influenced by a political judgement?

A

Lowering taxes may win votes however once the election is won the government won’t have as much spending power.

8
Q

Why is choice an important element in the economic problem?

A

Limited resources have different applications so a choice must be made of where to allocate the resources.

9
Q

What are the four factors of production?

A

Capital, Enterprise, Land and Labor.

10
Q

What is the economic problem?

A

How can scarce resources be used to satisfy people’s infinite need and wants as effectively as possible?

11
Q

Why is the following not a normative statement? “2 year old children are 100% more likely to commit murder than an adult over 18.”

A

Because it can be tested against facts.

12
Q

What does the existence of scarcity imply?

A

That individuals must make choices.

13
Q

What’s an example of an economic consumption activity?

A

Someone enjoying the flowers in a public park.

14
Q

What’s one reason that the free market fails to achieve optimal allocation of resources?

A

Because there is underproduction of goods with positive externalises.