2. Economic methodology
2.1 What is economics?
야매 뜻: the study of how to allocate sacarce resources in the most efficient way
macroeconomics: the study of an economy or a group of economies
microeconomics: the study of individual markets (households and firms)
division of them is not clear (e.g. increase in demand for cars could affect an
economy’s export and import trade)
2.2 Economics as a social science
‘social’ → economics looks at human behaviour, particularly in relation to
satisfying human needs and wants
‘science’ → economists define problem to be investigated, put forward a theory,
investigate the theory and then accept or reject the theory like scientists
model: a simplified view of reality used to explain economic problems and issues
2.3 Positive and normative statements
positive statement: a statement that is based on facts or actual evidence
→ X give their opinion or make a value judgement
e.g. A fall in supply of petrol leads to an increase in its price
normative statements: a statement that is based on the economist’s opinion or
value judgement and which cannot be proven
→ express an opinion or make a value judgement
e.g. A fall in the suplly of petrol should lead to an increase in its price
조동사나 부사 주의 → “should”, “likely”, “might”, “is the worst/best”
2.4 Meaning of the term ceteris paribus
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Ceteris paribus: a Latin phrase meaning ‘other things are unchanged’ → model the
effects of one change at a time
e.g. all other facctors that determine consumer demand are ceteris paribus
‘at the margin’: small change in on variable (e.g. consumer income) will lead to
further changes in otehr variables (e.g. consumer spending & imports) → predict
what the likely impact of change might be
decision-making by consumers, firms and gov. is based on choices at the
margin
→ e.g. firms will produce up to the point where the revenue generated by an extra
unit of output = the cost of producing it
2.5 The importance of time periods
time period → assess how, over time, change can influence the concepts that
economists seek to model and explain - factors of production
short run: time period when a firm can change at least one but not all factor inputs
labour (variable resource) → increase or decrease to change what is produced
(ceteris paribus)
long run: time period when all factors of production are variable but witha
constant, such as the state of technology
possible for all factors of production to change (e.g. firm improve the quality &
qunatity of its capital ← building a new factory = more efficient, it has had time to
assess the best way to achieve its objectives)
very long run: time period when all keyp inputs into production are variable
other key inputs are variable with all factors of production → technology, gov.
regulations, social concerns
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