Practise economic methodology by distinguishing positive and normative statements, applying ceteris paribus and choosing short-run or long-run reasoning for behavioural models.
What is a common criticism of economics?
It fails to establish theories of economic behaviour.
It is unable to construct models of how an economy might work.
It lacks the ability to use and apply mathematics.
It is very difficult to undertake laboratory experiments in economics.
The following appeared in a newspaper article.
'The economies of the poorest nations have large international debts; the richest nations should cancel the debts of these nations and reduce poverty.'
What is the nature of each statement?
poorest nations have
large international
debts
richest nations should
cancel these debts to
reduce poverty
normative
normative
normative
positive
positive
positive
positive
normative
To increase production, a firm in industry X needs to install capital equipment, while a firm in industry Y needs to research and introduce a new technology.
What time periods are illustrated by these cases?
industry X
industry Y
short run
long run
long run
long run
long run
very long run
very long run
very long run
The price of a good rises by 5% and the quantity of it demanded rises by 3%. At the same time, the incomes of consumers of the good rise by 4%.
The law of demand appears not to be working in this case.
What is the most likely explanation?
Other things did not remain equal.
The demand for the good was price inelastic.
The real price of the good fell.
The time period was the very short run.
