Economics as a social science

Economics and models

Economists develop models to explain how the economy works for example circular flow of income

Distinction between ‘theory’ and ‘model’

Can be used interchangeably. They are simplified to make them more useful

Why must assumptions be made

There are too many variables which can change within an economic model and so assumptions must be made.

What does ceteris paribus mean ‘all other things being equal’

All sciences make assumptions when developing models and theories, and this allows them to simplify the problem. Economists use the term ‘ ceteris paribus ’ meaning ‘all other things remaining equal’. For example, when there is a change in income, demand will shift, ceteris paribus.

Why is ceteris paribus needed

All sciences make assumptions when developing models and theories which allows them to simplify the problem

Why can’t economists make scientific experiments

As its a social science its difficult to set up experiments to test hypothesis. Other variables are always changing so difficult to decide whether evidence is supportive.