Economic Methodology and the economic problem

Question 1

Economics is …

Answer 1

-Study of scarcity
-social science

Question 2

Difference between positive and normative statements

Answer 2

Positive-can be scientifically proven

Normative-opinion and value judgment (should be avoided)

Question 3

Moral judgement and political judgement

Answer 3

Moral judgement- based on what is right and good

Political judgement- based on need to appeal to selected groups

Question 4

Central purpose of economic activity

Answer 4

Production of goods and services to satisfy needs and wants

Question 5

Key economic decisions

Answer 5

What to produce
How to produce
Who to produce for

Question 6

Factors of production

Answer 6

LABOUR-human effort

LAND-natural resources

CAPITAL-goods produced to assist production of other goods

ENTERPRISE-combination of other factors to produce g+s (motivated by profit)

Question 7

Fundamental economic problem

Answer 7

SCARCITY

limited resources and unlimited wants

Question 8

Opportunity Cost

Answer 8

next best alternative foregone when making a choice

Question 9

PPF

Answer 9

shows all possible combinations of maximum amount of two goods or services