AQA A-Level Economics

## What economists study and how Economics is a **social science**: it studies how people, firms and governments make choices when resources are limited, and what the results are for society. Like the natural sciences it builds models, tests them against evidence and revises them when they fail. Unlike them it studies human behaviour, which cannot be put in a laboratory, is influenced by expectations and by what others are doing, and does not always follow a predictable pattern. So economists rarely get the clean, repeatable experiments a physicist does, and they rely on observed data, natural experiments (where a policy change affects one group and not a comparable one) and, increasingly, controlled trials. ### Models and ceteris paribus An economic model is a simplified picture of part of the economy. It leaves out detail on purpose so that the main relationships can be seen, in the way a map leaves out most of the ground it covers. Models rest on assumptions, for example that consumers are rational or that firms in a market sell identical products, and a model is only as useful as those assumptions are realistic enough for the question being asked. Because many things change at once in a real economy, models use the assumption of **ceteris paribus**, Latin for "all other things being equal". To see the effect of a change in price on the quantity demanded, everything else that affects demand (incomes, tastes, the prices of related goods) is held constant. This makes cause…