CPE: What is Economics?

What is Economics?

A science that studies human behaviour, specifically how individuals and societies deal with scarcity (the central problem). Also understood as a decision science concerned with production, distribution, and consumption of goods and services.

What does the study of Economics cover?

The production of goods and services (how much, methods, employment) and the consumption of goods and services (how much spent, consumption patterns, factors affecting consumption).

Why do economists use theories, frameworks, or models?

To simplify, explain, and predict various economic phenomena.

What is a limitation of economic models/frameworks?

They have shortcomings as they are based on a set of assumptions and are unable to perfectly represent what happens in the real world all the time.

What are the two main branches of Economics?

Microeconomics and Macroeconomics.

What is Microeconomics?

Concerned with the individual parts of the economy, such as the behaviours and decisions of individuals and firms in particular markets (e.g., demand and supply of particular goods and services).

What is Macroeconomics?

Concerned with the economy as a whole, focusing on aggregate demand (total spending) and aggregate supply (total national output) (e.g., studying the economy of Singapore).

What is a Positive Statement?

A statement of fact. Its accuracy can be tested or verified by appealing to facts.

What is Positive Economics?

A branch of economics that describes and explains economic phenomena, focusing on facts and cause-and-effect relationships, including the development and testing of economic theories.

What is a Normative Statement?

A statement of value or opinion. It is about what ought or ought not to be, cannot be proved or disproved by facts, and is often subjective.

What is Normative Economics?

The branch of economics that expresses value judgements about economic fairness.

How are Positive and Normative Statements used in essays?

Positive statements provide factual explanations supported by frameworks. Normative statements are used in 'Discuss' type questions to express value judgements and opinions.