Nature of Economics (Theme 1 Pack 1)

• What is economics?


  A social science concerned with the study of the human brain. It investigates how scarce and limited resources are allocated to provide for humans unlimited wants.
• What is the difference between positive and normative statements?

  • Positive statements: factual, can be tested (e.g., "Unemployment is 5%").
  • Normative statements: opinion-based, cannot be tested (e.g., "Unemployment should be lower").
• What is a value judgement in economics?

  A value judgement is an opinion about what is desirable in economics. Example: "The government should prioritize healthcare spending."
• What are the four factors of production?

  1. Land: natural resources (e.g., timber).
  2. Labor: human effort (e.g., factory workers).
  3. Capital: machinery (e.g., robots).
  4. Entrepreneurship: business leaders (e.g., CEOs).
• What is the difference between renewable and non-renewable resources?

  • Renewable resources: can be replenished (e.g., solar energy).
  • Non-renewable resources: finite supply (e.g., oil).
• What does scarcity mean in economics?

  Scarcity refers to limited resources relative to unlimited wants. Example: clean water.
• How does the economic problem differ from scarcity?

  The economic problem involves resource allocation due to scarcity.
• What are three ways to tackle an economic problem?

  1. Implementing policies (e.g., tax reforms).
  2. Encouraging innovation (e.g., new technologies).
  3. Improving education (e.g., workforce training).
• Who are the three economic agents?

  1. Households
  2. Firms
  3. Government
• What is an example of opportunity cost for a consumer?

  Opportunity cost: buying a phone vs. saving for a vacation.
• What is an example of opportunity cost for the U.K government?

  Opportunity cost: funding healthcare vs. education.