1.1.1 Economics as a social science

Question 1

define microeconomics

Answer 1

studies the behaviour of individuals and firms in a market, and how the choices they make interact to determine prices, quantities and the allocation of scarce resources

Question 2

define the economic problem

Answer 2

there are unlimited wants but scarce resources, so the wants cannot be satisfied and choices have to be made

Question 3

what is a model

Answer 3

a simplified representation of reality used to provide insight into economic decisions and events e.g demand and supply

Question 4

how is a theory different from a model

Answer 4

theories can often be expressed in words whilst models are expressed in mathematical terms

Question 5

identify reasons why demand may not always rise as price falls in markets in the real world

Answer 5

falling incomes, lower consumer confidence, product falling out of trend, negative publicity about the product

Question 6

who are the main economic agents

Answer 6

consumers, firms and government

Question 7

how are models developed

Answer 7

economists must make assumptions to develop a model to explain the real world. these are gradually relaxed over time to further complicate the model

Question 8

what is ceteris paribus

Answer 8

a major assumption that means all other things remaining equal when investigating the relationship between two variables e.g the theory of demand states that a higher quantity will be demanded at lower prices, ceteris paribus

Question 9

what is economics the study of

Answer 9

how society organises scarce productive resources to satisfy people’s unlimited wants

Question 10

why can economists not conduct scientific experiments

Answer 10

they cannot prove the relationship between two variables because other variables are constantly changing