1- Economics as a social science Flashcards
What is a model?
A theoretical concept that looks at how different variables interact.
What do models contain?
Both qualitative information and statistical data to underpin the theoretical thought process.
Why do Economists use models?
To observe change in one variable and how it impacts others.
Who are the main Economic agents/actors?
Individuals, buyers/sellers, firms/businesses.
What do we assume about Economic agents?
They act rationally:
- Consumers wish to maximise utility
- Producers wish to maximise profit
What are social sciences?
They involve the study of human beings and how they interact in the ever changing world. It’s based on prejudice and opinion.
What is scientific methodology in natural sciences?
You make a hypothesis and then you test it by changing a variable in your experiment and observe how it affects other variables in the test to reach a conclusion.
Why is it difficult to follow scientific methodology in economics?
Humans are ever changing and not static.
What is Ceteris Paribus?
It means all other factors remain equal and unchanged.
When is Ceteris Paribus used?
In economic models in studying the effect of one variable on another. With ceteris paribus, if one variable changes, economists assume the others remain unchanged. To remedy the problem of the ever changing world.
Utility defintion
Refers to benefits (satisfaction or happiness) consumers derive from a good and it can be measured based on individuals’ choices between alternatives or preferences revealed in their willingness to pay.
