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Examles of social sciences
Geography, history, classics
Economics
Economics is the study of the choices that people make in overcoming the problems that arise because resources are limited, while needs and wants are unlimited
Nine key concepts of IB economics
scarcity, choice, efficiency, equity, economic well-being, sustainability, change, interdependence, and intervention.
Needs
Things we must have to survive
Wants
Things we would like to have but are not necessary for our immediate physical survival.
Goods
Products that satisfy human wants and needs
Services
Activities performed to satisfy needs and wants.
Economic goods
Goods that have a monetary cost associated with them
Free goods
Goods that have no cost associated with them
Opportunity cost
Whenever a choice is made concerinng the use of its resources, something is given up, or sacrificed.
Opportunity cost link to scarcity and choice
Due to limited resources (scarcity) we must make a choice. The opportunity cost is the value of the next best alternative that we give up. Scarcity forces us to make these choices.
Microeconomics
The study of individuals - households and firms behavior in decision making how resources are allocated.
Macroeconomics
The study of the behavior and performance of the economy as a whole. It focuses on the aggregate changes in the economy eg unemployment, inflation and economic growth
What should be produced and how many
Do governments or businesses decide
How should things be produced
Labour intensive or capital intensive
For who should things be produced
Age groups? Income groups?
Factors of production
Land, labour, capital, and entrepreneurship
Land
resources provided by nature
Labour
Physical and mental contribution of human resources
Capital
Anything made by humans that is then used to produce a good or service
Entrepreneurship (management)
Organisers of land, labour and capital to produce goods and services
Positive economics
Positive economics is concerned with making factual claims by collecting data to prove or refute a hypothesis.
Normative economics
Normative economics is concerned with saying how things should be by making subjective and value judgements.
Planned economy
An economic system where the government makes all decisions regarding the production and distribution of goods and services, often aiming for equitable resource allocation.
Free market economy
An economic system where decisions regarding investment, production, and distribution are driven by the supply and demand of goods and services, with minimal government intervention. Resources are transferred to where the demand is bigger.
Mixed economy
An economic system that combines elements of both planned and free market economies, allowing for some government intervention while also relying on market forces to allocate resources.
Advantages of planned economies
include the ability to achieve equitable distribution of resources, eliminate unemployment, and focus on long-term goals rather than short-term profits.
Advantages of free market economies
include efficiency in resource allocation, innovation driven by competition, and the ability to respond quickly to consumer preferences.
Disadvantages of planned economies
Hard to sustain because of high level of coordination needed, limited consumer choice and potential for inefficiencies
Disadvantages of free market economies
income equality (wealth distributed unevenly) monopoly power, exploitation
Ceteris paribus
‘other things being equal’ - when examining one factor, economists assume that all other relevant factors remain constant.
Model builders
Economists are often referred to as model builders because they create simplified representations (models) of real-world economic scenarios to better understand and predict how economies function.
