Defining the Economic Problem



Economic Methodology and The Economic Problem

1. What makes economics a social science?

2. How is it different to the natural sciences?

3. Distinguish between a normative and a positive statement in Economics.

4. Give an example of a positive statement and of a normative statement.

• Positive

• Normative

5. What is the purpose of economic activity?

6. What key decisions does an economic system have to make?

7. The market mechanism is one way of dealing with the economic problem. How does the market allocate resources?

8. What is the economic problem? Include these terms in the explanation – wants, needs, scarcity, choice, allocation, opportunity cost.

9. Use an example to illustrate the economic problem..

10. How do we classify the scarce resources?

Explanation of the economic problem

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|Your task is to write a 100 word explanation of the economic problem. It needs to be in easily understood language as it is |

|for a student who is new to the study of economics. You must include these terms in your explanation – wants, needs, scarcity,|

|choice, allocation, opportunity cost. Try to use an example. |

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