1. Economic Methodology and the Economic Problem

2. What is economics?
Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.
Lionel Robbins
What does it mean? Annotate key issues around your definition
An example of ends and scarce means:
We need to deal with the health issues of smokers
We need to help people who suffer passive smoking
We need to spend money on tobacco related illnesses
We need to discourage the use of tobacco
We need to raise money from taxing tobacco products
We need to give people the right to choose which product they like
HW identify and explain a scarcity problem of your own. – Who is involved, what happens, impact, resolution, is it fairly allocated?, solutions or suggestions.

3. The basic economic problem
Unlimited wants + Scarce resources = Allocation problem
Who gets what currently in the UK?
If our aim is to maximise economic welfare (happiness) how should we organise the economy – free markets or government control?
Are there other valuable aims for economics? Business efficiency, equality and equity, Environmental sustainability?

4. Methodology Natural sciences work using ….
Social sciences rely on the collection and analysis of data eg….
They are similar –
Use of theory to explain reality
Use of statistics to prove/ disprove theory
Organising experiments, pilots or tests

5. Positive and Normative Economics
Positive economics relies on fact to establish proof or disproof. This form of economics uses words like ‘will’, ‘was’ or ‘is’.
Add an eg
Normative economics expresses opinions of the best policy or action. This form of economics uses words like ‘should be’ or ‘ought to be’.
Add and eg
Economics generally tries to use positive reasoning – politicians and business leaders often use economics to justify their normative reasoning

6. Wants and Needs
Needs are the things people require for survival eg food, liquid, warmth and shelter these are finite meaning….
Wants are the things we would like, things we desire eg a black and gold iphone 8, a ticket for ‘T in the park’ these are infinite meaning…

7. Economic welfare
Improving economic welfare is seen as key to economics. If we organise societies resources well people will be happy.
How do we measure happiness?
Our ability to consume goods and services?
Our work life balance
Our GDP per head
Life expectancy
Human development index
Gini coefficient

8. Conclusions from the GNI and HDI tables
Significant points of comparison
Significant issues illustrated