Economic Methodology & the Economic Problem

These flashcards cover key concepts in Economic Methodology and the Economic Problem, such as the definitions of core economic terms and models.

Economic Methodology

The study of how economics as a social science builds models to understand human interactions.

Ceteris Paribus

A Latin phrase meaning 'all other variables remain constant', used to simplify economic models.

Positive Economics

Concerned with objective statements about how markets or economies function, based on empirical evidence.

Normative Economics

Focuses on value judgments and opinions about what economic policies should be pursued.

Opportunity Cost

The loss of the next best alternative when making a decision.

Production Possibility Curve (PPC)

An economic model that depicts the maximum output that can be achieved with given resources.

Scarcity

The basic economic problem that arises because resources are limited while human wants are infinite.

Factors of Production

Resources used to produce goods and services, including land, labor, capital, and enterprise.

Productive Efficiency

Achieved when an economy produces goods and services at the maximum capacity using available resources.

Allocative Efficiency

Occurs when resources are distributed in a way that maximizes the overall benefit to society.