THEME 1 A Level Economics Edexcel A
Ao1 – Knowledge and understanding.
Ao2 – Link in context. Evidence fully and reliably integrated
Ao3 – logical and coherent chains of reasoning.
Economics as a science
Scientific methods observe the phenomena and measures the
effects. Analysing the data to discover underlying patterns. This
forms a hypothesis based on collected evidence.
For economics there are too many variables influencing the
demand for cars:
Mileage
Fuel
Price
Condition
Brand
Car safety/protection
Age
Model
Size
There are too many variables to control such as income. It is
not possible to influence the consumer confidence.
‘Ceteris Paribus’ – All other factors being equal/unchanged.
We can question ceteris paribus in our evaluation.
,Steps of the social science method:
1) Make observations and identify a question to be answered.
2) Identify important variables that influence the relevant
outcome(s)
3) Formulate a hypothesis about how the variables are
related to each other.
4) Make assumptions for the hypothesis to be true.
5) Test the hypothesis to see if its predictions fit with what
actually happens in the real world.
An economic model is a simplified version of reality that
allows us to observe, understand, and make predictions about
economic behaviour. The purpose of a model is to take a
complex, real-world situation and pare it down to the essentials.
If designed well, a model can give the analyst a better
understanding of the situation and any related problems.
Economic models use computer models which use algorithms
to make predictions about economic outcomes.
In economics, the possibilities for experiment are very limited.
Therefore econometrics is used to test hypothesis.
Economics is the study of how society allocates scarce
resources between the competing uses derived from needs and
unlimited wants.
Economy – a system for the production and exchange of goods
and services to satisfy wants and needs of the population. E.g.,
market economy, planned economy.
Microeconomics is the study of individual economic behaviour,
in terms of making choices about how to use scarce resources.
, Decisions made by ‘market agents’: the firm, industry or
consumer, household, government.
Market failure:
- Negative externalities
- Excess demand
- Excess supply
The market values resources with supply and demand such as
when resources are scarce as demand exceeds supply.
Opportunity cost – The value of the next best alternative
foregone when a choice has been made. The benefit or utility
sacrificed from foregoing the next best alternative in an
economics decision.
Positive statements – are capable of being tested. Can be
proven or disproven.
Normative statements – About fairness and equality. Based
on opinion, cannot be tested. Not capable of being proven
or disproven.
Positive Normative
The rate of unemployment in The government should spen
2020 was x%. more on health than educati
The rate of inflation in 2020 was Progressive tax is more fair t
x%. regressive tax.
The government should redu
VAT on goods and services.
Always state which piece of data can be tested and allude
how in a positive statement.
Ao1 – Knowledge and understanding.
Ao2 – Link in context. Evidence fully and reliably integrated
Ao3 – logical and coherent chains of reasoning.
Economics as a science
Scientific methods observe the phenomena and measures the
effects. Analysing the data to discover underlying patterns. This
forms a hypothesis based on collected evidence.
For economics there are too many variables influencing the
demand for cars:
Mileage
Fuel
Price
Condition
Brand
Car safety/protection
Age
Model
Size
There are too many variables to control such as income. It is
not possible to influence the consumer confidence.
‘Ceteris Paribus’ – All other factors being equal/unchanged.
We can question ceteris paribus in our evaluation.
,Steps of the social science method:
1) Make observations and identify a question to be answered.
2) Identify important variables that influence the relevant
outcome(s)
3) Formulate a hypothesis about how the variables are
related to each other.
4) Make assumptions for the hypothesis to be true.
5) Test the hypothesis to see if its predictions fit with what
actually happens in the real world.
An economic model is a simplified version of reality that
allows us to observe, understand, and make predictions about
economic behaviour. The purpose of a model is to take a
complex, real-world situation and pare it down to the essentials.
If designed well, a model can give the analyst a better
understanding of the situation and any related problems.
Economic models use computer models which use algorithms
to make predictions about economic outcomes.
In economics, the possibilities for experiment are very limited.
Therefore econometrics is used to test hypothesis.
Economics is the study of how society allocates scarce
resources between the competing uses derived from needs and
unlimited wants.
Economy – a system for the production and exchange of goods
and services to satisfy wants and needs of the population. E.g.,
market economy, planned economy.
Microeconomics is the study of individual economic behaviour,
in terms of making choices about how to use scarce resources.
, Decisions made by ‘market agents’: the firm, industry or
consumer, household, government.
Market failure:
- Negative externalities
- Excess demand
- Excess supply
The market values resources with supply and demand such as
when resources are scarce as demand exceeds supply.
Opportunity cost – The value of the next best alternative
foregone when a choice has been made. The benefit or utility
sacrificed from foregoing the next best alternative in an
economics decision.
Positive statements – are capable of being tested. Can be
proven or disproven.
Normative statements – About fairness and equality. Based
on opinion, cannot be tested. Not capable of being proven
or disproven.
Positive Normative
The rate of unemployment in The government should spen
2020 was x%. more on health than educati
The rate of inflation in 2020 was Progressive tax is more fair t
x%. regressive tax.
The government should redu
VAT on goods and services.
Always state which piece of data can be tested and allude
how in a positive statement.
