Economics as a social science

What is economics?

 Economics is a social science that studies how people use resources, money, goods, and services, analysing choices and their effects on society.

 Natural Sciences study the physical world, focusing on concepts like gravity and chemical reactions, using experiments and measurements.

Social Sciences study people and societies, focusing on human behaviour, relationships, and decision-making (e.g., economics, politics).

Problems with the scientific method

The scientific method involves testing a hypothesis by changing one variable at a time in a controlled environment to see its effect. Economist can't use this easily because, in the real world many factors change at once, making it hard to isolate the effect of one variable and come to a conclusion.

 Theories vs Models

Theory - loose statement about how we expect events to work out e.g. if prices down - more purchasing

Model - More practical and simplified representations of reality and economic theories, often using graphs or equations, which provide insight to economic decisions and events e.g. Demand curve

 Ceteris paribus - 'all other things being the same'

 It simplifies economic analysis by isolating one variable's effect on another and making assumptions. This helps analyse how a specific change, like price, impacts quantity demanded. It establishes clear cause-and-effect relationships without distractions from multiple variables and serves as a starting point for building models before considering additional factors like income.

Acceptance of Economic Theories

Economic theories become accepted as laws due to consistent evidence, accurate predictions, simplicity, consensus among economists, practical applications, and relevance to current events. The law of demand illustrates this by showing that lower prices usually lead to higher quantity demanded.