Unit 1: Nature of economics

• Why do economists build models?

  To understand social interactions better as society is complex. Make a wide range of assumptions (generalisations about behaviour, choices and likely outcomes)
• What is a model?


  Simplified version of reality
• What is 'think like an economist'?

  Identifying which variables will be studied and which will be excluded.
• Define Ceteris Paribus


  All other variables remain constant
• Why do economists use ceteris paribus?

  It allows economists to simplify and explain causes and effects
• Empirical research


  Data was collected through observations, surveys, and opinion polls.
• Positive statements/economics


  Statements of facts based on empirical evidence
• What is a characteristic of positive statements?

  It can be falsified and tested. For example, Statistics
• Normative statements/economics


  Statements based on value judgements that cannot be proven or disproven
• What are value judgments based on?

  Personal opinions and beliefs about economic policies or solutions. For example, statements made by political leaders on economic agendas.
• What is the role of value judgments?

  Influence individuals' choices in the economic decisions they make. Influence government choices when creating economic policies to adopt and spend money on.