economic methodology chapter 2

Question 1

macroeconomics (3 points)

Answer 1

the study of an economy or a group of economies. Macroeconomics also looks at how consumers and firms interact but on a broader level. Macroeconomics is likely to include some form of government involvement.

Question 2

microeconomies (2 marks)

Answer 2

the study of individual markets. looks at the behavior and decisions of consumers and businesses and how they interact

Question 3

economics (1 point)

Answer 3

the study of how to allocate scarce resources in the most efficient way.

Question 4

model (3 points)

Answer 4

a simplified view of reality used to explain economic problems and issues. usually explained mathematically. The value of models is that they can be used over and over again to test a theory in many different contexts.

Question 5

Economics as a social science (3 points)

Answer 5

The ‘social’ aspect is because economics looks at human behavior, particularly in relation to satisfying human needs and wants. Economics is also a ‘science’. This is because of the way that economists put forward and investigate theories in the same way as scientists. The theories put forward by economists are often referred to as models.

Question 6

positive statement (2 points)

Answer 6

statement that is based on facts or actual evidence. the economist does not give their opinion or make value judgement

Question 7

normative statement (1 point)

Answer 7

statement that is based on the economist’s opinion or value judgement and which cannot be proven.

Question 8

ceteris paribus (3 points)

Answer 8

Latin phrase meaning ‘other things equal’ or ‘other things are unchanged’; used by economists to model the effects of one change at a time. allows economists to simplify a situation by assuming that apart from a single change of circumstances, everything else is unchanged.

Question 9

the margin (4 points)

Answer 9

another tool economists like ceteris paribus use to simplify a situation. Many aspects of microeconomics involve analysing decisions at the margin’. By this, economists mean that a small change in one variable will lead to further (small) changes in other variables. it enables economists to predict what the likely impact of change might be.

Question 10

importance of time periods (2 point)

Answer 10

Economists take change into account in their analysis of situations. They use time periods to assess how, over time, change can influence the concepts that economists seek to model and explain.

Question 11

short run (2 points)

Answer 11

time period in which it is possible to change only some factors of production. it is when a factor of production, can be increased or decreased to change what is produced.

Question 12

long run (1 point)

Answer 12

time period when all factors of production are variable but with a constant

Question 13

very long run (1 point)

Answer 13

time period where all factors of production are variable