3.1.1.1 Economic methodology

What is a social science ?

studies human behaviour as individuals + parts of organisations and their use of scarce resources

What are similar methodologies between natural sciences and other sciences?

• develop theories + create models

• use simplifying assumptions to limit variables

• test theories + models against known facts

• use empirical data + use economics models

What are different methodologies between natural sciences and other sciences?

no controlled lab experiments where only one variable changed at a time

eg. trying to examine whether price of cheese changes demand for it won’t factor in a change in consumer income

What is ceteris paribus?

means all other things remaining equal

used when looking at relationship between two factors eg, price and demand

economists only these two factors change

helps economist develop theories, models and make predicitons

What are 4 ways economic decisions could be made?

Normative statements - opinions

Moral views and value judgements - eg. people shouldn’t be poor so share wealth

Political judgements - eg. lowering taxes wins government votes

Short term positive consequence - ⬇tax ➔ win election ➔ ⬇government income ➔ public spending cuts

What are positive statements?

objective statements that can be tested using evidence

show if economics ideas are correct

What are normative statements?

subjective statements that contain value judgement - opinions

Why are normative statements important?

value judgements influence decision making and government policy eg. political party may increase taxes for the rich to redistribute to the poor