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4 Scrib Upload Course Introduction Nature and Scope of Economics

Economics uses two types of analysis: positive analysis which describes how the economy works, and normative analysis which makes judgements about economic outcomes. Economic theories are propositions used to explain phenomena, while models illustrate and represent theories. When creating theories and models, economists must avoid fallacies like post hoc and composition fallacies. Economics seeks to answer four basic questions: what to produce, how much to produce, how to produce, and for whom to produce. Opportunity cost refers to the best alternative given up when making a choice.

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Neri Sangalang
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56 views7 pages

4 Scrib Upload Course Introduction Nature and Scope of Economics

Economics uses two types of analysis: positive analysis which describes how the economy works, and normative analysis which makes judgements about economic outcomes. Economic theories are propositions used to explain phenomena, while models illustrate and represent theories. When creating theories and models, economists must avoid fallacies like post hoc and composition fallacies. Economics seeks to answer four basic questions: what to produce, how much to produce, how to produce, and for whom to produce. Opportunity cost refers to the best alternative given up when making a choice.

Uploaded by

Neri Sangalang
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Nature and Scope of

Economics

By Engr. Ma. Nerissa P. Sangalang, RCE,LPT,MBA


Two kinds of analysis
• Positive Economic Analysis – simply
describes what exists and how thing s
work.
• Normative Economic Analysis – looks atht e
outcome of economic behavior thorugh
judgements and prescriptions for courses
of action.

09/03/2020 Microeconomics module by Engr. N. Sangalang 2


Theories and Models
• Theories are prepositions about certain
related variables that scientifically expalkin
a certain phenomena.

• Models re used to illustrate,d emostrate


and represent a theory or parts of it
( Baumol, 2009)

09/03/2020 Microeconomics module by Engr. N. Sangalang 3


Fallacies in making Models
and Theories
• Post hoc fallacy – relates two evetns as if
the first event causes the second one to
happen. (“A “occurred immediately before
“B”. Therefore A caused B.)
• Ceteris Paribus –means all things being
equal or held constant
• Fallacy of composition- what is true for a
component is also true for the entire thing.

09/03/2020 Microeconomics module by Engr. N. Sangalang 4


Four Basic Economic Questions

• What goods or services should be


produced?
• How much of each good or service
should be produced?
• How to produce?
• For whom to produce?

09/03/2020 Microeconomics module by Engr. N. Sangalang 5


Opportunity Cost or Trade-off
It is the computed value of the next best
alternative that is given-up when a choice is
made given a set of choices

Opportunity Cost is subjective to the value


one holds for the different options he/she
faces

09/03/2020 Microeconomics module by Engr. N. Sangalang 6


END

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