Question

to sha LLLLL Discuss the Seven Cove concepts of that define the economic way of thinking? Give examples. 2. What is the difference between positive and Nomative stalements! 3. Why do Economists use graph 4. Explain the difference between Human Capital, Financial capital and hysical capital Describe the Circular flow of the economy by discussing the two markets where households and firms meet, the role of government and the role of foreigner.

Answer 1

1):-The seven principal or concept are:

1):-Scarcity forces tradeoffs

•It means Limited resources force people to make choices and face tradeoffs when they choose.

• In short form we can say unlimited desires, limited resources.

2):-cost verses benefits

• Under it People choose something when the benefits outweigh the cost

• In nutshell weight the pros and cons.

3):-Thinking at the margin

• Under it Our decisions involve choices that demand slightly more. Of less of something instead of wholesale change.

• In nutshell most of the decisions we make each day involve choices about a little more or a little less of something rather than making a wholescale change.

4):-Incentives matter

• It means People respond to incentives in generally predictable ways.

5):-trade makes people better off

• It means we need to concentrate on what we do best and then trade with others for what they do best.

•Focusing on what we do well and trading with other leads to more/ better choices than doing everything by ourselves.

6):-Markets coordinate trade

• It means Markets do better than anyone/ anything lose at coordinating exchanges better buyers and sellers.

7):-future consequences count

It means decisions made today have consequences.

2) ':-the difference between positive and normative economic statements

•Positive statements are statements about economics which can be proven true or false by evidence.

•Normative statements are statements which cannot by supported or refuted as they are value judgements, i.e. Opinions, about how economies and markets should work.

•Positive statements are objective statements that can be tested, amended or rejected by referring to the available evidence.

•Positive economics deals with objective explanation and the testing and rejection of theories.

•Normative Statement is A value judgement is a subjective statement of opinion rather than a fact that can be tested by looking at the available evidence.

•Classical economists discribe economy as a positive science.

•Neo- classical economist discribe it as normative.

•Economists tend to be interested in both positive and normative economics. They want to find out how economies work. But hey also want to influence policy debates.

•Normative economics also typically contains positive economics within it; when putting forward a value judgement economists are likely to back up their opinion with positive evidence.