Nature Of Economics 1.1.1
Created @October 30, 2023 6:13 PM
Tags
Economics as a Social Science
Economics considered as a social science as it involves the study of human
behaviour and the way that individuals and societies make choices
Economists use models to predict the impact of their economic experiments
Ceteris paribus - “All other things being equal”
Basic Economic Problem
Infinite wants and finite resources
Concept of scarcity
Economists try to solve this problem by asking:
What goods and services should be produced?
How should these goods or services be produced?
For whom should the goods or services be produced?
Factors of Production:
1. Land required to create space for the manufacturing process
2. Labour required to create the product
3. Capital required to carry out manufacturing process and create the product
4. Entrepreneurship - Needed to identify demand for product, identify risks and
be able to manage other factors of production
Opportunity Cost:
Nature Of Economics 1.1.1 1
, Opportunity cost - the benefit associated with the next best alternative forgone
Nature Of Economics 1.1.1 2
, Positive and Normative
Statements 1.1.2
Created @October 30, 2023 6:13 PM
Tags
Positive Statement:
Positive Statement - A statement of fact that can be tested to see if it is correct or
incorrect
Examples:
The UK spends £45 billion on defence
Watford will require at least one more primary school by 2020
If pensions are cut, more old people will die in winter months
People buy Apple products because they are more expensive
Normative Statement:
Normative Statement - A statement that includes a value judgement, where if it is
right or wrong depends on you beliefs and values, rather than scientific testability
Look for words such as “should”, “must”, “ought”, “better” and “worse”
Examples:
The government should reduce the overseas aid budget
The government must devote more resources to healthcare
Comprehensive schooling is better than selective schooling
Economic Welfare:
Positive and Normative Statements 1.1.2 1
, How well people are doing/faring
Often economic welfare equated with production and consumption of goods
and services
This ignores quality of life factors
Positive and Normative Statements 1.1.2 2
Created @October 30, 2023 6:13 PM
Tags
Economics as a Social Science
Economics considered as a social science as it involves the study of human
behaviour and the way that individuals and societies make choices
Economists use models to predict the impact of their economic experiments
Ceteris paribus - “All other things being equal”
Basic Economic Problem
Infinite wants and finite resources
Concept of scarcity
Economists try to solve this problem by asking:
What goods and services should be produced?
How should these goods or services be produced?
For whom should the goods or services be produced?
Factors of Production:
1. Land required to create space for the manufacturing process
2. Labour required to create the product
3. Capital required to carry out manufacturing process and create the product
4. Entrepreneurship - Needed to identify demand for product, identify risks and
be able to manage other factors of production
Opportunity Cost:
Nature Of Economics 1.1.1 1
, Opportunity cost - the benefit associated with the next best alternative forgone
Nature Of Economics 1.1.1 2
, Positive and Normative
Statements 1.1.2
Created @October 30, 2023 6:13 PM
Tags
Positive Statement:
Positive Statement - A statement of fact that can be tested to see if it is correct or
incorrect
Examples:
The UK spends £45 billion on defence
Watford will require at least one more primary school by 2020
If pensions are cut, more old people will die in winter months
People buy Apple products because they are more expensive
Normative Statement:
Normative Statement - A statement that includes a value judgement, where if it is
right or wrong depends on you beliefs and values, rather than scientific testability
Look for words such as “should”, “must”, “ought”, “better” and “worse”
Examples:
The government should reduce the overseas aid budget
The government must devote more resources to healthcare
Comprehensive schooling is better than selective schooling
Economic Welfare:
Positive and Normative Statements 1.1.2 1
, How well people are doing/faring
Often economic welfare equated with production and consumption of goods
and services
This ignores quality of life factors
Positive and Normative Statements 1.1.2 2
