Economic and Free Goods:

• Economic goods are valuable to society but face scarcity and have an opportunity cost.
• Due to their scarcity, economic goods hold value, are bought by consumers, and can be traded.
• Free goods have no opportunity cost as they are abundant; examples include air and water.
• Free goods are not traded since they are readily available.

Scarcity:

• Scarcity is the fundamental economic issue.
• Human wants are limitless, while resources are finite, necessitating choices.
• Optimal resource use and distribution are essential.
• Scarcity implies a shortage of resources relative to human wants.
• Example: With only £1 at a shop, you must choose between a chocolate bar or a packet of crisps due to the scarcity of money.

Positive and Normative Statements:

• Positive statements are empirical and verifiable; they rely on factual evidence and can be either accepted or rejected.
  • They often contain words like "will" or "is."
  • For example, "Raising the tax on alcohol will lead to a fall in the demand for alcohol and a decrease in the profits of pub landlords" is a positive statement.
  • "Higher temperatures will lead to an increase in the demand for sun cream" is another example.
  • These statements can undergo testing, and their outcomes can determine acceptance or rejection.
• Normative statements, in contrast, stem from value judgments and are subjective, lacking factual evidence support.
  • They are opinion-based rather than grounded in objective data.
  • Normative statements don't rely on empirical testing for validation.
  • Identify words like 'should' in a statement, indicating a preference for one action over another.
  • For instance, "The free market is the best way to allocate resources" is a normative statement as it reflects an opinion and asserts the superiority of one resource allocation method.
  • Another example is "The government should increase the tax on alcohol."

Economic Agents:

• Economic agents play pivotal roles within the economy.
• The conventional assumption is that these agents primarily act in their self-interest.

Government:

• Governments are generally assumed to act on behalf of consumers.
• The extent of government intervention in the economy can vary significantly.