14. What is the difference between positive economic statement and normative one?

Positive economics looks at the facts and the economy as they actually are, avoiding value judgements and attempting to seek scientific bases about economic activities. It is an approach that deals with “what is” rather than with “what ought to be” and includes no indication of approval or disapproval. Normative economics, on the other hand, is concerned about what ought to be. Normative economics is used to take decisions as for issues of equity, equality, and fairness, since these concepts include judgments about what ought to be.

One must decide what goals are desirable (the normative part), and choose a way of attaining those goals (the positive part).

15. What is positive economics concerned with?

Positive economics concerned with the facts and the economy as they actually are, avoiding value judgements* and attempting to seek scientific bases about economic activities. It is an approach that deals with “what is” rather than* with “what ought to be” and includes no indication of approval or disapproval. Positive economics is used to analyze what is, what was, and what will occur when one activity is performed instead of another activity.

16. What does normative economics deal with?

Normative economics deal with what ought to be. It comprises ethical precepts and value judgments* ціннісні судження about whether economic policies are good or bad. Normative economics is used to take decisions as for issues of equity, equality, and fairness, since these concepts include judgments about what ought to be. Normative economics attempts to show that one activity is better than another activity.

Factors of production

1. Why is it important for a society to use economic resources efficiently?

Economic resources are scarce relative to the limitless needs and wants of people and businesses operating in the economy. So itt is important to use these resources efficiently in order to maximize the output that can be produced from them.

2. What are the factors of production?

The factors of production – the productive resources of land, labour, capital and entrepreneurship that go into the production process. Each factor of production has a place in the national economy, and each has a particular function.

3. What is “land” as a factor of production?

Land or natural resources are the things provided by nature such as soil and minerals that are used in the creation of products.

4. What is rent? Who receives it?

The price paid for the use of land is called rent.

5. Why are some goods classified as free ones?

Air, sunshine, rainfall are classified as free goods since consumption by one person does not reduce their availability for others - free goods do not have an opportunity cost.

6. What is labour?

Labour is the human efforts required to produce goods and services.

7. What efforts do people put into the production of goods and services?

Economists distinguish between the physical and mental efforts that people put into the creation of goods and services.

8. What price is called wage?

The price paid for the use of labor is called wages. Wages represent income to workers, who own their labour. To the economists, the term refers to the nation’s wealh paid for labor, as distinct from other forms of income – rent, interest and profit.

9. Why is labour not of the same quality?

Not all labour is of the same quality. Some workers are more productive than others because of the education, training and experience they have received. The amount of labour will depend ultimately on the population of the country (or the world, if people can immigrate), and on the number of people who are available to work. Those in school, those retired, too handicapped to work*, mothers who stay at home with their children are not part of the labour force.

10. What is capital as the third factor of production?

Capital is something created to produce goods and services; also money used to pay for the operation of a business.

11. What does capital refer to as a factor of production?

Capital or physical capital refers to the machinery, tools*, roads, factories, and buildings which individuals have produced in order to produce other goods and services.

12. What is the difference between physical capital and financial capital?

Capital or physical capital refers to the machinery, tools*, roads, factories, and buildings which individuals have produced in order to produce other goods and services. Financial capital refers to money that people can use to buy factories, machinery and other similar productive resources.

13. What is interest?

Payment for the use of someone else's money, or capital, is called interest.

14. How do economists and entrepreneurs consider financial capital?

To an economist, capital is the finance raised to operate a business, whereas business people refer capital to money that they can use to buy factories, machinery and other similar productive resources.

15. What is entrepreneurship?

Entrepreneurship is the willingness of business owners to take risks and introduce new products and services to the market. It is the managerial or organizational skills needed by most firms to produce goods and services.

16. Whom do we call an entrepreneur?

Entrepreneurs are people who bring together other productive resources to make goods and services. Entrepreneurs serve an important role in enabling the economy to adjust to changing conditions and new possibilities for material improvements by creating new business enterprises, and even whole new industries.

17. What reward do entrepreneurs receive for their risks involved?

The reward to entrepreneurs for the risks, innovative ideas and efforts that they have put into the business are profits, whatever remains after the owners of land, labor and capital have received their payments.

18. Why is information considered to be the fifth factor of production?

The fifth factor of production is information, because business cannot compete without information about markets, financial conditions, and other important business conditions.