1.2 Economic Methodology

• Positive economics


  Statement of fact that can be tested and proven
• Normative economics


  Opinion or value judgement, cannot be tested or proven
• Normative economics

  Keywords: Should or ought to
• Ceteris Paribus


  All other things remain constant
• Short run


  At least one factor of production is fixed, limit to how much producers can respond to a change in price
• Long run


  All factors of production are variable
• Very long run


  All factors of production and key inputs are variable