Economic methodology

Economics is a social science — a subject that studies how people make decisions about scarce resources. It uses evidenc

Economic methodology and the economic problem

Economic methodology

Economics uses scientific methods like forming hypotheses and testing them with data. But unlike chemistry or physics, e

Economic methodology and the economic problem

Economic methodology

A positive statement is a fact-based claim you can test against evidence. A normative statement is an opinion about what

Economic methodology and the economic problem

Economic methodology

A value judgement is a personal or moral view about what ought to happen. Economists and governments use value judgement

Economic methodology and the economic problem

Economic methodology

When people choose between economic options, two things shape their view. They look at the likely real-world outcomes, a

Economic methodology and the economic problem

Economic methodology

Economics is a social science — a discipline that studies human behaviour and decision-making using evidence and reasoni

Economic methodology and the economic problem

Economic resources

Economists sort every resource used to make goods and services into four groups: land, labour, capital, and enterprise.

Economic methodology and the economic problem

Economic resources

The environment — things like clean air, fresh water, and forests — exists in limited supply. Humans cannot use it witho

Economic methodology and the economic problem

Economic resources

Economists group everything used to produce goods and services into four factors of production: land (natural resources,

Economic methodology and the economic problem

Production possibility diagrams

A production possibility diagram shows the maximum combinations of two goods an economy can produce. It makes scarcity,

Economic methodology and the economic problem

Production possibility diagrams

Every point on the PPC boundary uses all available resources without waste — that is productive efficiency. But only one

Economic methodology and the economic problem

Production possibility diagrams

A production possibility diagram is a graph that shows the maximum combinations of two goods or services an economy can

Economic methodology and the economic problem

Scarcity, choice and the allocation of resources

Scarcity exists because resources — the things used to produce goods and services — are finite. At the same time, human

Economic methodology and the economic problem

Scarcity, choice and the allocation of resources

Resources are limited, so every individual, firm, and government must choose how to use them. Deciding to use a resource

Economic methodology and the economic problem

Scarcity, choice and the allocation of resources

Every time you choose one thing, you give up the next best alternative. Economists call that sacrifice the opportunity c

Economic methodology and the economic problem

Scarcity, choice and the allocation of resources

At the heart of economics lies scarcity — the fact that resources such as land, labour, and capital are finite, while hu

Economic methodology and the economic problem

The nature and purpose of economic activity

Economic activity means producing goods and services. Economies do this to satisfy needs — things essential for survival

Economic methodology and the economic problem

The nature and purpose of economic activity

Every economy must answer three core questions. These are: what goods and services to make, how to make them, and who re

Economic methodology and the economic problem

The nature and purpose of economic activity

At its core, economic activity is the process of producing goods and services in order to satisfy human needs — things e

Economic methodology and the economic problem