1.1
ECONOMICS AS A SOCIAL SCIENCE
ECONOMICS
Economics is the study of how societies allocate scarce resources to meet
unlimited wants
social science - study of human behaviour using scientific method, relies on stats
and everyday observations to test theories
ASSUMPTIONS
economic model
provides a framework to understand economic phenonmena
allows for predictions, and to test theories
assumptions may be unrealistic
doesnt capture all complexities - simplification of reality
ceteris paribus
temporary assumption that all other factors are equal,
allows us to focus on one variable at a time
helps identify cause and effect relationships between variable
POSITIVE VS NORMATIVE
Positive
objective statement
testable - can be proven/proven wrong
Normative
subjective statement
involves value judgement
1.1 1
, ROLE OF VALUE JUDGEMENT IN ECONOMIC DECISION MAKING
conflict in values
ethics
public influence
influenced by societal values
THE ECONOMICS PROBLEM
scarcity - finite resources are insufficient to satisfy unlimited human wants
opportunity cost - value of the next best alternative given up
FACTORS OF PRODUCTION
Capital - man-made resources (machinery)
Enterprise/entrepreneur - Ability of owner (ideas from CEO)
Land - natural resources (oil, water)
Labour - Human effort (workers)
RENEWABLE VS NON RENEWABLE
renewable - can generate naturally - wont run out
non renewable - cannot generate naturally - will run out
depletion of non renewable resources leads to rising prices and economic
challenges
PPF - PRODUCTION POSSIBILITY FRONTIER
curve that shows the maximum combination of goods and services
that a firm can produce with its resources and technology
1.1 2
ECONOMICS AS A SOCIAL SCIENCE
ECONOMICS
Economics is the study of how societies allocate scarce resources to meet
unlimited wants
social science - study of human behaviour using scientific method, relies on stats
and everyday observations to test theories
ASSUMPTIONS
economic model
provides a framework to understand economic phenonmena
allows for predictions, and to test theories
assumptions may be unrealistic
doesnt capture all complexities - simplification of reality
ceteris paribus
temporary assumption that all other factors are equal,
allows us to focus on one variable at a time
helps identify cause and effect relationships between variable
POSITIVE VS NORMATIVE
Positive
objective statement
testable - can be proven/proven wrong
Normative
subjective statement
involves value judgement
1.1 1
, ROLE OF VALUE JUDGEMENT IN ECONOMIC DECISION MAKING
conflict in values
ethics
public influence
influenced by societal values
THE ECONOMICS PROBLEM
scarcity - finite resources are insufficient to satisfy unlimited human wants
opportunity cost - value of the next best alternative given up
FACTORS OF PRODUCTION
Capital - man-made resources (machinery)
Enterprise/entrepreneur - Ability of owner (ideas from CEO)
Land - natural resources (oil, water)
Labour - Human effort (workers)
RENEWABLE VS NON RENEWABLE
renewable - can generate naturally - wont run out
non renewable - cannot generate naturally - will run out
depletion of non renewable resources leads to rising prices and economic
challenges
PPF - PRODUCTION POSSIBILITY FRONTIER
curve that shows the maximum combination of goods and services
that a firm can produce with its resources and technology
1.1 2
