Economic Methodology

Question 1

Why is economics seen as a social sciene?

Answer 1

Because it observes how humans behave and think.

Question 2

What is a positive statement?

Answer 2

Statements that are objective and fact based, which can be tested.

Question 3

What is a normative statement?

Answer 3

Statements based on value judgements. They are based on opinion.

Question 4

What is the economic problem?

Answer 4

How to allocate scarce resources given unlimited wants

Question 5

What do we look at before making choices?

Answer 5

What to produce
How to produce
For whom to produce

Question 6

What are the 4 factors of production?

Answer 6

Land
Labour
Enterprise
Capital

Question 7

What do economists used to check if the choices we made are the right one and explain it.

Answer 7

We use opportunity cost. This is the cost of the next best alternative, foregone when a choice is made.

Question 8

What are the 2 things that a production possibility frontier shows us?

Answer 8

Shows us the max number of 2 goods or services that can be produced with the given factors of production.

Shows the combination of 2 goods or services that can be produced with the given factors of production.

Question 9

What do we call a) points on the curve
b) points below the curve
c) points outside the curve

Answer 9

a) productively efficient
b) productively inefficient
c) unattainable

Question 10

What is pareto efficiency and where on the PPF is it?

Answer 10

It is the idea that nobody can be made better off without making someone else worse off.
This is on any point on the ppf.

Question 11

In which instances does the PPF boundary get bigger?

Answer 11

When theres an improvement or increase in the quality or quantity of the factors of production.