POSITIVE ECONOMICS - based
on testable theories, e.g. the idea
that higher interest rates lead to a
fall in aggregate demand can be
tested by looking at past data.
NORMATIVE ECONOMICS - based on opinion, e.g. the
idea that the Government should make the reduction of
unemployment its priority, is one person's view; another
person might think it is more important to increase
growth. Normative statements often have 'should' or
'ought to' in them; they involve value judgements.
MICROECONOMICS - focuses on individual markets
and decisions by individual households and firms.
MACROECONOMICS - focuses on the economy
as a whole, e.g. it considers the price level for the
economy as a whole, rather than for one market.
Sectors of the Economy
PRIVATE SECTOR - resources owned
and controlled by private individuals.
PUBLIC SECTOR - resources owned
and controlled by the State.
PRIMARY SECTOR - extractive industries,
e.g. forestry, fishing, mining.
SECONDARY SECTOR - converts raw
materials into goods, e.g. manufacturing.
TERTIARY SECTOR - service sector,
e.g. finance, tourism.
In the UK, the service sector has been growing and the
primary sector has been declining for some time.
Factors of Production
Factors of production go
through a transformation
process and are turned into
output.
LAND - natural resources, e.g.
land itself, minerals, the sea
LABOUR - human resources;
this depends on the population
size, the working age,
people's skills and the level of
training.
CAPITAL - man-made aids
to production, e.g. factories
and equipment.
ENTREPRENEURSHIP - this is the ability
to combine factors of production and take
risks in establishing new ventures.