Economics as a social science 1.1.1, 1.1.2, 1.1.3

What is meant by ceteris paribus?

All things being equal

What is ceteris paribus used for?

Used to isolate the effect of a specific variable while keeping other relevant factors constant.

Whys is economics considered a social science?

It looks at the behaviour of humans, either as individuals or as part of orgabisations and their use of scarce recourses.

What are the assumptions that neo-classical economists make?

• People are rational

• people aim to maximise their utility

• people act independently of each other when making their decision

• the information needed to make decisions is always accurate and complete

What is behavioral economics?

Studies the impact of psychological, social and emotional factors on economic decisions.

What is the law of demand?

All other things being equal, when the price of a good or service increases, the quantity demanded decreases, and conversely, when the price decreases, the quantity demanded increases.

What is the equation of productivity?

productivity = output / input

What are positive statements?

Objective statements that can be tested and evaluated based on empirical evidence.

What are normative statements?

Subjective statements- they carry one or more value judgements about what ought to be.

What are normative statements?

Uses subjective statements and value judgements

What is meant by opportunity cost?

The cost of any choice measure in terms of the next best alternative forgone.