1.1.1

Economics as a Social Science

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Economic Methodology and Ceteris Paribus

Economics is considered a social science. Economists develop models to understand behaviour. However, it is impossible to perfectly recreate everything. Therefore, models are based on a set of assumptions.

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Thinking like an economist

  • Economic methodology is similar to that of other social sciences:
    • Models and theories are used to explain real world evidence.
    • These models use real life data and can be used to make forecasts about the future.
    • Statistical analytics can be used to test hypothesise against evidence.
    • Nearly all models rely on assumptions and simplifications.
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Inability to make scientific experiments

  • Controlled laboratory tests aren't possible. In real life, economists can't keep variables constant.
  • Therefore, economists build models based on a set of assumptions.
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Ceteris Paribus

  • Economists rely on the ceteris paribus assumption. This means 'everything else remains equal'.
    • So when economists study the relationship between two factors, they'll assume that one factor changes while the rest stay constant.
  • This is the most important assumption for economists to create functioning models.

Jump to other topics

1Introduction to Markets

2Market Failure

3The UK Macroeconomy

4The UK Economy - Policies

5Business Behaviour

6Market Structures

7A Global Perspective

8Finance & Inequality

9Examples of Global Policy

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