Year 12 AS Economics Miss Haron 2 30122021

Year 12 AS Economics Miss Haron

2 30/12/2021 Start of lesson drills 1. 2. 3. 4. Planner on the desk Pen/stationary available Exercise book on the desk Date and title copied 1. 1. 1 5. Economics as a social science Ready to learn Theme 1 – Microeconomics – 1. 1. 1 – The nature of Economics

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

4 30/12/2021 Social science http: //www. esrc. ac. uk/news-and-events/videos/wissvideos. aspx 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, nongovernmental organisations and others. Theme 1 – Microeconomics – 1. 1. 1 – The nature of Economics

5 30/12/2021 The scientific method A particular method of work or enquiry Economics uses this method for investigation 1. Postulate a theory – put forward a hypothesis that is capable of refutation 2. Gather evidence – to support theory or refute it 3. Accept, modify or refute 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 – 1. 1. 1 – The nature of Economics

6 30/12/2021 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 – 1. 1. 1 – The nature of Economics

7 30/12/2021 Scarce resource – When there is not a sufficient amount of the resource to go around. Think of examples of scarce resources Theme 1 – Microeconomics – 1. 1. 1 – The nature of Economics

8 30/12/2021 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 = 567 + 0. 85 Yt Where 567 is a constant Theme 1 – Microeconomics – 1. 1. 1 – The nature of Economics

9 30/12/2021 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 – 1. 1. 1 – The nature of Economics

10 30/12/2021 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 – 1. 1. 1 – The nature of Economics

11 30/12/2021 Assumptions and ceteris paribus All scientists make assumptions when developing models http: //economictimes. indiatimes. com/definition/ceterisparibus 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 – 1. 1. 1 – The nature of Economics

12 30/12/2021 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 Ultimately they are opinions about 30% in size over the next 5 years 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 When economists want to influence. Theme policy debates, they use both 1 – Microeconomics – 1. 1. 1 – The nature normative and positive economics because they use positive of Economics economics to back up a normative statement.

13 30/12/2021 Plenary Sort the following statements between Normative and Formative Theme 1 – Microeconomics – 1. 1. 1 – The nature of Economics

14 30/12/2021 1. Pollution is the most 2. A fall in incomes will serious economic lead to a rise in problem 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 9. A reduction in income should enforce minimum tax will improve the prices for beers and incentives of the lagers sold in unemployed to find work supermarkets and offlicences in a bid to control alcohol. Theme 1 – Microeconomics – 1. 1. 1 – The nature of Economics consumption

15 30/12/2021 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 – 1. 1. 1 – The nature of Economics

16 30/12/2021 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 – 1. 1. 1 – The nature of Economics

17 30/12/2021 Homework Complete the two Net migration questions on the hand out Due Tuesday 15 th September - Period 2 (this time next week) Theme 1 – Microeconomics – 1. 1. 1 – The nature of Economics

Expectations 18 30/12/2021 Theme 1 – Microeconomics – 1. 1. 1 – The nature of Economics