T1: LS2 - Economics As A Social Science

Question 1

What are models and why are they used in economics?

Answer 1

A model refers to a theoretical construct representing economic processes and how they change depending on changing variables or situations that reflect reality.
- They allow economic hypothesise to be tested to see how the economy responds to it.
- It is difficult for economists to conduct experiments as it is a social science so modes, are used to predict changes.

Question 2

Define Ceteris Paribus?

Answer 2

• ”All other things being equal
• The concept that within an economy, since it is a social science, hypothesise cannot be effectively tested as variables cannot be isolated. As a result, economists assume “Ceteris paribus” that all other influences are held constant.