The economic problem

• What does the term "ceteris paribus" mean?

  All other things remaining the same
• How does "ceteris paribus" contribute to economic modeling?

  It allows models/theories to be developed by simplifying the problem so assumptions can be made
• What is a positive statement in economics?


  Objective statements which can be tested with factual evidence to be proven or disproven
• What distinguishes a normative statement from a positive statement?

  A normative statement is subjective and based on value judgments and opinions; it cannot be proven or disproven
• How do economists often use normative statements in their work?

  They use normative statements to support positive ones
• What does scarcity refer to in economics?

  A shortage of resources in relation to the quantity of human wants
• What are the key differences between positive and normative statements in economics?

  • Positive statements:
  • Objective
  • Testable with factual evidence
  • Normative statements:
  • Subjective
  • Based on value judgments and opinions
  • Cannot be proven or disproven