economic methodology and the economic problem Flashcards
(18 cards)
What is economics classified as in terms of science?
Economics is a social science.
How is economics similar to natural and other sciences?
(A) Economics uses models. (B) It tests hypotheses. (C) It uses empirical data.
How is economics different from natural and other sciences?
(A) Economics deals with human behaviour. (B) It cannot test theories in controlled
environments. (C) Results are not always predictable.
What is a positive statement in economics?
A positive statement is one that can be tested and validated or refuted by evidence.
What is a normative statement in economics?
A normative statement is based on value judgements and cannot be tested.
How do value judgements influence economic decision-making?
People’s opinions about the best decision are influenced by predicted outcomes and
their own values.
How do moral and political judgements influence economic policy?
Moral and political judgements affect which economic outcomes are considered
desirable.
What is the central purpose of economic activity?
The central purpose is to produce goods and services to satisfy needs and wants.
What are the three key economic decisions?
(A) What to produce. (B) How to produce. (C) Who benefits from the goods and
services produced.
What are the four factors of production?
(A) Land. (B) Labour. (C) Capital. (D) Enterprise.
How is the environment classified in economics?
The environment is a scarce resource.
What is the fundamental economic problem?
The fundamental economic problem is scarcity due to limited resources and unlimited
wants.
Why does scarcity lead to choice?
Scarcity means not all wants can be fulfilled, so choices must be made about
resource use.
What is opportunity cost?
Opportunity cost is the next best alternative foregone when a choice is made.
What does a production possibility diagram show?
A production possibility diagram shows the maximum output combinations of two
goods or services given resources.
What economic concepts can be illustrated using a production possibility diagram?
(A) Resource allocation. (B) Opportunity cost. (C) Trade-offs. (D) Unemployment. (E)
Economic growth.
Why are all points on the boundary productively efficient?
All points on the boundary use all available resources efficiently.
Why are not all points on the boundary allocatively efficient?
Allocative efficiency depends on whether the output combination matches society’s
preferences.
