1.1.1 Economics as a social science

What is the difference between micro and macro economics?

Microeconomics focuses on individual markets whereas macroeconomics is the analysis of the economy as a whole.

Why is economics a social science?

• It studies societies and the human behaviour within those societies

• Human interactions are complex and are influenced by many variables

• It investigates how scarce resources are allocated to provide for unlimited humans wants

What is the ceteris paribus model?

• Translated from Latin, ceteris paribus means 'all other variables remain constant'

• It allows economists to simplify and explain causes and effects, even if the explanation is somewhat limited by the assumptions

For example, there are many factors that affect the level of unemployment in an economy (interest rates, consumer confidence, firms investment, government policies etc.). However, using ceteris paribus, economists can simplify the economic model to analyse just two variables (unemployment and interest rates). The analysis is conducted ceteris paribus. All the other variables remain constant, even when they are highly likely to have changed

Why did economists develop the ceteris paribus model?

Due to the large number of variables that can influence any particular economic interaction in society ;.,,

What are the 9 key skills which economists needs?

• Analytical

• Problem solving

• Knowledge of the real world

• Logical

• Evaluate problems

• Numerical

• Open to debate (pragmatic)

• Provide solutions

• Make sound choices based on evidence

What phrase do economists often use? What does it mean?

‘ceteris paribus’ - all things being equal

• This is used to say that on factor will cause another factor variable to change, assuming that all other factors remain constant

What are inferior goods?

a product we are less likely to buy if our income reduces