economic methodolgy

Question 1

What is economics classified as?

Answer 1

Economics is a social science

Social sciences study societies and human interactions within those societies.

Question 2

What do social sciences include?

Answer 2

• Psychology
• Politics
• Geography
• Business Studies

These subjects study different aspects of human behavior and society.

Question 3

What is a model in economics?

Answer 3

A model is a simplified version of reality

Models help economists understand certain interactions.

Question 4

What are examples of economic models?

Answer 4

• Circular flow of income
• Production possibility curves
• Demand and supply

These models illustrate different economic concepts and relationships.

Question 5

What do all economic models make?

Answer 5

Assumptions

Assumptions are generalizations about behavior, choices, and likely outcomes.

Question 6

What does ‘thinking like an economist’ involve?

Answer 6

Identifying which variables will be studied and which will be excluded

This approach considers the type of relationship between variables (causal or correlation).

Question 7

True or False: Correlation implies causation.

Answer 7

False

For example, an increase in ice cream sales does not cause an increase in car thefts.

Question 8

What is the social scientific method?

Answer 8

A variation of the scientific method used in social sciences

It involves empirical research and cannot always guarantee consistent results due to human complexity.

Question 9

What are the tools used in economic analysis?

Answer 9

• Logic
• Hypotheses
• Models
• Theories

These tools help ensure reliability in positive statements.

Question 10

What is the ceteris paribus assumption?

Answer 10

All other variables remain constant

This principle allows economists to simplify models to analyze specific variables.

Question 11

What is positive economics concerned with?

Answer 11

Objective statements of how a market or an economy works

These statements are based on empirical evidence and can be proven true or false.

Question 12

Provide an example of a positive economic statement.

Answer 12

The unemployment rate in India has fallen from 8% to 7.3% in the past twelve months

Positive statements are factual and based on data.

Question 13

What is normative economics focused on?

Answer 13

Value judgements about what the best economic policies or solutions may be

Normative statements are often opinions and beliefs.

Question 14

Provide an example of a normative economic statement.

Answer 14

Every economy should aim to provide free healthcare for its citizens

Normative statements often include the word ‘should.’

Question 15

What influences governments’ choices regarding economic policies?

Answer 15

Value judgements

These judgements are shaped by public perception and expected outcomes.

Question 16

What is the difference between equity and equality?

Answer 16

• Equity: Concerned with fairness
• Equality: Concerned with everyone being equal

Different societies have varying views on what constitutes fairness and equality.

Question 17

What would be considered a positive economic statement regarding inequality?

Answer 17

In 2018, women in the USA were paid 12% less than men in comparable jobs

This statement is based on statistics and factual data.

Question 18

What is the debate surrounding markets and governments?

Answer 18

The degree to which they should create greater equity or equality in an economy

This debate involves differing opinions on economic policies and their impacts.