Economics: The Study of Choice

Read this chapter to learn about the economic way of thinking and the principles of scarcity and opportunity cost. Be sure to click through each of the sections. Note how individuals and businesses make everyday decisions at the margin. Learn about the differences between macroeconomics and microeconomics.

1.3 The Economists' Tool Kit


  • Economists try to employ the scientific method in their research.
  • Scientists cannot prove a hypothesis to be true; they can only fail to prove it false.
  • Economists, like other social scientists and scientists, use models to assist them in their analyses.
  • Two problems inherent in tests of hypotheses in economics are the all-other-things-unchanged problem and the fallacy of false cause.
  • Positive statements are factual and can be tested. Normative statements are value judgments that cannot be tested. Many of the disagreements among economists stem from differences in values.