1. Year 12 AS Economics
Miss Haron

2. Start of lesson drills Planner on the desk Pen/stationary available
23/09/2018
Start of lesson drills
Planner on the desk
Pen/stationary available
Exercise book on the desk
Date and title copied
1.1.1 Economics as a social science
Ready to learn
Reminder
Theme 1 – Microeconomics – – The nature of Economics

3. Theme 1 1.1 – The nature of Economics
1.1.1 Economics as a social science
a) Thinking like an economist: the process of developing models in economics, including the need to make assumptions
b) The use of the ceteris paribus assumption in building models
c) The inability in economics to make scientific experiments

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Social science
Social science is the study of society and the manner in which people behave and influence the world around us.
It tells us about the world beyond our immediate experience, and can help explain how our own society works - from the causes of unemployment or what helps economic growth, to how and why people vote, or what makes people happy. It provides vital information for governments and policymakers, local authorities, non-governmental organisations and others.
Theme 1 – Microeconomics – – The nature of Economics

5. The scientific method A particular method of work or enquiry
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The scientific method
A particular method of work or enquiry
Economics uses this method for investigation
Postulate a theory – put forward a hypothesis that is capable of refutation
Gather evidence – to support the theory or refute it
Accept, modify or refute the theory
Theories that gain universal acceptance become laws e.g. the law of gravity / in economics, the laws of supply and demand
Theme 1 – Microeconomics – – The nature of Economics

6. Economics – the science
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Economics – the science
In natural science (e.g. biology) it is easy to use the scientific method.
In social sciences (e.g. economics) it is often not possible to set up experiments to test hypothesis because it is not possible to establish control groups or with a constant
Economists sometimes come to very different conclusions
Economics is the study of how groups of individuals makes decisions about the allocation of scarce resources
Theme 1 – Microeconomics – – The nature of Economics

7. Think of examples of scarce resources
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Scarce resource – When there is not a sufficient amount of the resource to go around.
Think of examples of scarce resources
Theme 1 – Microeconomics – – The nature of Economics

8. Theories and models There is no exact distinction between the two
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Theories and models
There is no exact distinction between the two
Theory
Model
Theory is defined in looser terms than a model
Economic models have greater precision in their specification
Often expressed in words
Often expressed in numbers or with a graph
e.g. “consumption is dependent on income”
e.g. Ct = Yt
Where 567 is a constant
Theme 1 – Microeconomics – – The nature of Economics

9. The purpose of modelling
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The purpose of modelling
Economists build models and theories to explain economic interactions
To explain why something “is why it is” e.g. why can birds fly? and to decide how to act in the future e.g. avoiding holes in the ground so that we don’t trip
Theme 1 – Microeconomics – – The nature of Economics

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Simplification
Some people believe that economic theories are unrealistic
This is true, but it is equally true of Newton’s law of gravity.
A theory or model is a simplification of reality
If a model is to be useful, it has to be simple
Theme 1 – Microeconomics – – The nature of Economics

11. Assumptions and ceteris paribus
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Assumptions and ceteris paribus
All scientists make assumptions when developing models
Ceteris Paribus – “all things remaining the same”
Economists will isolate one factor to attempt to model and everything else will remain unchanged
E.g. consider how price affects the amount demanded and they will ignore all other factors that affect demand e.g. income and price of other goods etc.
Theme 1 – Microeconomics – – The nature of Economics

12. Positive and Normative economics
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Positive and Normative economics
Positive economics
Normative economics
The scientific or objective study of the subject
The study or presentation of public policy
Statements can be supported or refuted (proven true or false) by evidence
Statements can’t be supported or refuted because they are values
e.g. The service sector will grow by 30% in size over the next 5 years
Ultimately they are opinions about how economies and markets should work
Economists will wait 5 years to support/refute the statement but it can be proved/disproved
e.g. the government should increase the state pension
Norm – the government should increase the state pension
Positive – the average pensioner has a disposable income of 40% of the average worker
When economists want to influence policy debates, they use both normative and positive economics because they use positive economics to back up a normative statement.
Theme 1 – Microeconomics – – The nature of Economics

13. Plenary Sort the following statements between Normative and Formative
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Plenary
Sort the following statements between Normative and Formative
Theme 1 – Microeconomics – – The nature of Economics

14. 1. Pollution is the most serious economic problem
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1. Pollution is the most serious economic problem
2. A fall in incomes will lead to a rise in demand for own-label supermarket foods
3. If the government raises the tax on beer, this will lead to a fall in profits of the brewers
4. The congestion charge for drivers of petrol-guzzling cars should increase to £25
5. The government should increase the minimum wage to £7 per hour to reduce poverty
6. The rising price of crude oil on world markets will lead to an increase in cycling to work
7. The retirement age should be raised to 70 to combat the effects of our ageing population
8. The government should enforce minimum prices for beers and lagers sold in supermarkets and off-licences in a bid to control alcohol consumption
9. A reduction in income tax will improve the incentives of the unemployed to find work
PLENARY
Theme 1 – Microeconomics – – The nature of Economics

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Positive
2. A fall in incomes will lead to a rise in demand for own-label supermarket foods
3. If the government raises the tax on beer, this will lead to a fall in profits of the brewers
6. The rising price of crude oil on world markets will lead to an increase in cycling to work
9. A reduction in income tax will improve the incentives of the unemployed to find work
Theme 1 – Microeconomics – – The nature of Economics

16. Normative 1. Pollution is the most serious economic problem
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Normative
1. Pollution is the most serious economic problem
4. The congestion charge for drivers of petrol-guzzling cars should increase to £25
5. The government should increase the minimum wage to £7 per hour to reduce poverty.
7. The retirement age should be raised to 70 to combat the effects of our ageing population.
8. The government should enforce minimum prices for beers and lagers sold in supermarkets and off-licences in a bid to control alcohol consumption
Theme 1 – Microeconomics – – The nature of Economics

17. Homework Complete the two Net migration questions on the hand out
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Homework
Complete the two Net migration questions on the hand out
Due Tuesday 15th September - Period 2 (this time next week)
Theme 1 – Microeconomics – – The nature of Economics

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Expectations
Theme 1 – Microeconomics – – The nature of Economics