Flashcards in Economic Methodology Deck (17)
What are the aims of economics?
Increase economic and social welfare.
Provide information to make informed judgement.
What difficulties are there in economics?
The lack of complete information.
Economics isn't exact science.
Define ceteris paribus.
"All things being equal", it means to ignore other variables and consider the effect of just one variable.
What is a positive economic statement?
Statements based on facts and can be tested as true or false.
1.) In May 2015, the UK inflation rate was 0.5%
What is a normative economic statement?
Statements based on an opinion or value judgement. People can disagree with statements, for example:
1.) The government should increase taxes on alcohol to improve the nation's health.
What is an opportunity cost?
The next best alternative foregone.
Give an example of a combined positive and normative statement.
Because oil prices have increased by £100 (fact), I believe the government should cut petrol tax (opinion)
What is economic activity?
Concerned with the production of goods and services to satisfy the needs and wants of consumers.
What is the fundamental economic problem?
Issue of scarcity (limited resources) - and how best to produce and distribute these scarce resources.
What are the factors of production?
Items used in the production process to make goods and services.
What are the main factors of production?
Define the factor of production: Capital.
Machines and equipment used in productive process to manufacturing goods.
Define the factor of production: Enterprise.
The human initiative to set up a business.
Define the factor of production: Labour.
Workers able to participate in a productive process.
Define the factor of production: Land.
Raw materials e.g. wood. Something, which can be taken from the natural world without adaption.
Define non-renewable resources.
These are natural resources that are finite. Once used, they cannot be replaced. For example, coal, oil, precious metals and gas are all finite.