Economics as a Social Science

The social nature of economics (AO2)

• Economics is a social science, meaning it focuses on certain relationships humans have with the rest of society. 

• It looks at the relationship between consumers, producers, and governments, using both empirical, objective evidence, as well as examining the various behaviors humans exhibit when presented with choices. 

• Although supposed to represent real scenarios and events, economics is explained using theoretical models and diagrams.

• As with most social sciences, there is often no correct answer when it comes to economic policies and decisions, compared to the natural sciences, for example.

The basis of the study of economics: Microeconomics and Macroeconomics (AO2)

Economics can be split up into 2 main categories:

• Microeconomics is the study of individuals and firms in specific markets within a country.

  • • Example: The supply and demand of soft drinks in the UK after the government imposed an extra tax on sugar

• Macroeconomics is the study of countries' whole economies. 

  • • Example: The relationship between inflation and unemployment in the US.

The 9 central concepts in economics (AO2)

The IB has chosen a set of 9 key concepts that are key to understanding economics. When the time comes, you have to choose 3 of these concepts to center your 3 IAs around, but IA aside, these are useful to have in the back of your head when thinking about economics.
Here is a diagram that shows the 9, with more detailed descriptions below:

1. Well-being: Economic well-being refers to the level of prosperity and quality of life, influenced by the interactions and choices of economic agents that impact both individuals and societies.

2. Interdependence: Interdependence highlights the reliance on others to achieve economic goals, as globalization connects economies, making decisions in one region affect others globally.

3. Scarcity: We have unlimited wants, yet our planet has limited resources, meaning rational choices in production and consumption are needed.

4. Efficiency: Efficiency measures how well resources are used to produce goods and services, aiming for an optimal output that meets the needs and wants of society.

5. Choice: Economics revolves around the study of choices made due to limited resources, with decisions evaluated based on opportunity costs at various economic levels.

6. Intervention: Intervention refers to government actions in regulating markets to correct failures and ensure an efficient, equitable, and sustainable allocation of resources.

7. Change: Economic change is constant and driven by various factors, requiring economic agents to adapt and respond to evolving conditions.

8. Equity: Equity deals with the idea of fairness in the distribution of resources, which varies across individuals and societies and is central to addressing global economic issues.

9. Sustainability: Sustainability is about meeting present needs without compromising future generations, focusing on the impact of economic activity on the environment and resources.