1.1 Nature of economics

Ceteris paribus:

all other factors are equal. this allows us to focus on one variable at a time

e.g., Ceteris Paribus, when the price of something increase, people buy less of it

Positive statement vs normative statement

a positive statement is an objective statement; it is testable

a normative statement is a subjective statement and it involves value judgement

Scarcity

Finite resources are insufficient to satisfy unlimite dhuman wants. due to scarcity, we need to make trade-offs

Problem of scarcity

people have finate needs but infinate wants, as no one would choose to live at the level of basic human living standards if they can enjoy more.

Opportunity cost

the value of the next best alternative forgone (given up)

Product Possibility Frontiers

PPF shows the maximum posible combinations of capital and consumer goods that the economy can produce with its current resources and technology