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Economics as a Social Science

  • Explain that economics is a social science.

  • Outline the social scientific method.

  • Explain the process of model building in economics.

  • Explain that economists must use the ceteris paribus assumption when developing economic models.

  • Distinguish between positive and normative economics.

  • Examine the assumption of rational economic decision-making.


  • scarcity exists because factors of production are finite and wants are infinite.

  • economics studies the ways in which resources are allocated to meet needs and wants.

  • the three basic economic questions that must be answered by any economic system are: “What to produce?”, “How to produce?” and “For whom to produce?”

Choice and Opportunity Cost

  • as a result of scarcity, choices have to be made.

  • when an economic choice is made, an alternative is always foregone.

  • a production possibilities curve (production possibilities frontier) model may be used to show the concepts of scarcity, choice, opportunity cost and a situation of unemployed resources and inefficiency.

Central Themes

  • the extent to which governments should intervene in the allocation of resources

  • the threat to sustainability as a result of the current patterns of resource allocation

  • the extent to which the goal of economic efficiency may conflict with the goal of equity

  • the distinction between economic growth and economic development.

Economic Fundamentals

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