1.1 nature of economics

Ceteris Paribus

all other things being equal

positive statements

objective statements that can be tested and evaluated based on empirical evidence

empirical

factual

examples of positive statements

• an increase in the UK minimum wage will lead to higher unemployment among low-skilled workers

• inflation rates rose up to 2.9% in the last 12 months

minimum wage

lowest hourly pay that an employer can legally give to a worker

normative statements

are subjective statements that carry 1 or more value judgements+ involve personal beliefs

example of normative statements

• taxes on high-income earners should be raised to reduce income inequality

• a sustained fall in house prices would be good for the UK economy in the long term

economic assumption

economic groups try to be rational to things that will maximize their satisfaction