1.1.1 Economics as a social science

Question 1

Models and theories are built upon what

Answer 1

Assumptions

Question 2

What are assumptions

Answer 2

• initial or prior conditions made before a micro or macroeconomics analysis is built
• Sometimes used for simplification of a theoretical idea or an economic relationship

Question 3

What is the ceteris paribus assumption

Answer 3

To simplify analysis, economist isolate the relationship between two variables by assuming ceteris paribus
All other factor are kept constant

Question 4

Name 4 assumptions neo-classical economist make

Answer 4

• People are rational
• agents of the market aim to maximise utility
• People act independently of each other when making decisions
• information to make decisions always need to be accurate and complete