Unit 1 ECON1 - Economics: Markets and Market Failure (3.1)
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Summary First Year Microeconomics
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Unit 1 ECON1 - Economics: Markets and Market Failure (3.1)
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AQA
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A-Level Economics
AQA-Level Economics consists of four modules: year 1 (3.1 & 3.2) and year 2 (4.1 & 4.2).
3.1 The Operation of Markets and Market failure corresponds to first year microeconomics
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Summary A-Level Economics, ISBN: 9781782943570 Unit 3 - Business behaviour and the labour market
Summary A-Level Economics, ISBN: 9781782943570 Unit 3 - Business behaviour and the labour market
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Unit 1 ECON1 - Economics: Markets and Market Failure (3.1)
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,3.1.1 Economic methodology
and the economic problem
Microeconomics
, 3.1.1.1 Economic methodology
A natural science is when scientists observe aspects of the universe. A social science is the observation of human behavior. Economics is a social
it studies the complex world of human behavior.
A value judgement – Subjective statement of opinion in contrast People’s views concerning the be
to an objective fact or theory that can be tested by looking at
Short-termism the available evidence. influenced by the positive cons
• The choices a politician makes may be motivated different decisions and by mora
by short term gain. All government economic policies are influenced by value
• But this decision may not lead to the best judgements, which vary from person to person, resulting in judgements.
outcome in the long term fierce debate between competing political parties.
• Examples of short-termism policies include: Revision Questions
Lowering income tax today, Promising to remove Positive Statement – describes the world as it is. They are 1. What is the difference between positive and
objective statements that can be proved. 2. Describe similarities and differences of econom
university tuition fees, Paying staff higher wages and other social science
now. Normative Statement - describes how the world should be. 3. How do value judgements influence econom
Scarcity They are opinions that contain value judgements. policy.
4. What is economics as a social
• At any point in time, there is only a finite 5. How are people’s views concerning the bes
amount of resources available. Value judgements – These are found within normative
6. How is thinking as an economist different to o
statements, and are judgements about society that cannot
• Scarcity means that our wants and needs are be quantified and tested
enquiry
greater than the amount of available resources.
This is because resources and raw materials are Similarities with social sciences
needed to produce these goods and services, Economic methodology is like that of other social sciences:
but they are in limited supply. • Models and theories are used to explain real world evidence
Decisions • Statistical analytics can be used to test hypothesise against
Economic agents make decisions based on: evidence.
Nearly all models rely on assumptions and simplifications
• Political Judgements
Differences to social sciences
• Short-term outcomes But economic methodology differs from that of natural sciences
• Moral judgements too:
• Normative statements • Controlled laboratory tests aren't possible. In real life,
Economics as a social science economists can't keep variables constant.
- Economics studies how humans make • Economists rely on the ceteris paribus assumption. This
decisions under scarcity. means 'everything else remains equal'.
- The types of decision include: Individual, So when economists study the relationship between two
factors, they'll assume that one factor changes while the
family, business and societal.
rest stay constant.
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