The nature of economics: a social science, models, assumptions and ceteris paribus
Introductory concepts open Unit 1, Markets in action, the first AS paper (WEC11).
In recent papers this topic carried about one in ten of the compulsory marks, mostly as multiple-choice items, a Section B explanation and a Section C definition, plus an occasional 20-mark essay on production possibilities.
The ideas in this first section are rarely asked about directly, but every later answer in the course uses them: you will write ceteris paribus in front of almost every prediction you make.
- 1 hour 45 minutes, 80 marks, four sections: Section A six multiple-choice questions at 1 mark (a key only: no working and no explanation marks); Section B five 4-mark short answers in fixed slots (Q7 Draw, Q8 Explain one reason or advantage, Q9 Explain the difference, Q10 Calculate an elasticity, Q11 Explain the likely impact with a named diagram); Section C one data-response question on a Source Booklet, parts worth 2, 6, 4, 8 and 14; Section D one 20-mark essay from two.
- Point-marked items print a split line ("Knowledge 1, Application 1, Analysis 2"). Each creditable phrase earns one mark, labelled (1), (1K), (1AP) or (1AN); "/" separates alternative wordings.
- Examine [8] is point-marked: two points, each identified (1K) and developed (1AN), two data points (1AP each), and evaluation "2+0 or 1+1" (one developed comment or two brief ones). Only the best two points count.
- Discuss [14] and Evaluate [20] are levels-marked in two separate strands: Knowledge, Application and Analysis (KAA, out of 8 or 12) and Evaluation (out of 6 or 8). Only the essay's top evaluation level needs an informed judgement.
- Caps: without the diagram the question asks for, a Discuss or an essay cannot reach the top KAA level; an essay that develops only one benefit is capped at KAA Level 3 (9 of 12).
- Calculations: an elasticity written with a % sign loses 1 of its 4 marks. Draw items give every mark for the diagram and none for writing.
- Allow about 1.3 minutes a mark: about 25 minutes for the essay, so do not leave it until last.
The idea: economics studies people, and people cannot be put in a laboratory
Economics is the study of how individuals, firms and governments make choices about using scarce resources to satisfy their wants.
It asks questions such as: why did the price of cocoa rise in 2024?
Will a higher minimum wage cost jobs?
Should a government subsidise solar panels?
These questions matter because the answers decide what people can afford, which firms survive and how governments spend public money.
Economics is called a social science.
It is a science because economists form theories and test them against evidence, in the same way as physicists or chemists.
It is social because what it studies is human behaviour in society: buying, selling, working, saving and voting.
That one word explains most of what makes economics hard.
A chemist who wants to know whether temperature affects a reaction can run the reaction twice, changing only the temperature, and repeat it a hundred times.
An economist who wants to know whether a minimum wage costs jobs cannot raise the minimum wage in one copy of a country and leave it unchanged in an identical copy.
Economies cannot be repeated, people learn from what happened last time, and it would be unethical to throw thousands of people out of work to test a theory.
This is what is meant by the inability to conduct scientific experiments.
Why this matters: everything else changes at the same time
When the UK National Living Wage rose by 6.7% to £12.21 an hour for workers aged 21 and over in April 2025, many other things were changing in the economy at the same time: energy prices, interest rates, consumer confidence, and employers' national insurance contributions, which rose in the same month.
If employment in restaurants fell afterwards, how much of the fall was caused by the higher wage and how much by everything else?
No one can say for certain, because there is no copy of the UK where only the wage stayed the same.
Economists respond in three ways.
They look for "natural experiments", where two similar places happen to be treated differently (one region raises its minimum wage and the next region does not).
They use statistical methods to try to separate the effect of one variable from others.
And they build models.
Models built on assumptions
A model is a simplified representation of how part of the economy works.
A map is a good comparison: a map of a city leaves out the colour of every door and the name of every tree, because those details would hide what you need, which is the route.
In the same way the supply and demand model leaves out most of what happens in a real market and keeps only buyers' plans, sellers' plans and the price.
Every model rests on assumptions: statements taken to be true so that the model can work.
Common assumptions in this course are:
- consumers act rationally to maximise their utility (satisfaction), which you will meet in the topic on consumer behaviour and demand;
- firms aim to maximise profit;
- buyers and sellers have full information about prices;
- other influences stay the same while one variable changes.
An assumption is not a claim that the world really works this way.
It is a deliberate simplification.
A model is judged by whether its predictions are useful, not by whether its assumptions are perfectly realistic.
The supply and demand model assumes many buyers and sellers with full information, and yet it predicts well that a frost which destroys part of a coffee harvest will raise the price of coffee.
But assumptions also set the model's limits.
If consumers are not rational (behavioural economics shows they often are not), predictions based on rational consumers can be wrong.
Questioning an assumption is one of the strongest forms of evaluation you can write: "this conclusion assumes firms maximise profit; a firm aiming for growth in market share might not raise its price".
Ceteris paribus: changing one thing at a time on paper
Since the economist cannot hold other things constant in a laboratory, the model holds them constant on paper.
Ceteris paribus is Latin for "all other things being equal" (or "other things remaining the same").
It means that, while we study the effect of one variable on another, every other influence is assumed not to change.
The demand curve is built this way.
It shows how quantity demanded changes as the price changes, ceteris paribus: incomes, the prices of other goods, tastes and everything else are held fixed.
If one of those other things changes, the whole curve shifts.
Without the assumption the curve could not be drawn at all, because the relationship between price and quantity would be buried under every other change.
The same assumption lets us draw conclusions from a model.
"A rise in the price of petrol will reduce the quantity of petrol demanded, ceteris paribus" is a clear, testable prediction.
Without the phrase the prediction is often false in the data: in a year when incomes rise fast, people may buy more petrol even though its price rose, because the income effect swamped the price effect.
WEC11 uses the phrase itself.
In recent papers italic Ceteris paribus opened nine question stems, including every Section B elasticity calculation and several multiple-choice items.
When you see it, the examiner is telling you to change only the variable named and to keep everything else fixed.
Do not bring in other changes unless the question asks for them.
The limits of ceteris paribus
In the real world other things are never equal.
That gives you a ready-made evaluation point for almost any WEC11 answer: the prediction holds ceteris paribus, but in practice other factors may change at the same time and offset or reinforce the effect.
For example, a specific tax on sugary drinks should cut consumption, ceteris paribus; but if incomes rise strongly in the same year, consumption may not fall at all, and data would make the tax look ineffective when it was not.
- Economics as a social science: inability to conduct scientific experiments.
- Models and assumptions: The development of models in economics based on assumptions.
- Ceteris paribus in models: The use of the ceteris paribus assumption in building models and drawing conclusions based on them.
- Social science: the study of human behaviour in society using scientific methods (theory tested against evidence), where controlled experiments are generally not possible.
- Model: a simplified representation of an economic relationship or system, built on assumptions, used to explain and predict.
- Assumption: a condition taken to be true in order to simplify a model.
- Ceteris paribus: all other things being equal; every variable other than the one being studied is assumed to remain constant.
Ceteris paribus, which one of the following is the most likely result of a 10% rise in the price of bus tickets in a city?
A Incomes in the city rise and more bus trips are made.
B The quantity of bus trips demanded falls.
C The price of taxis rises, so demand for buses increases.
D The demand curve for bus trips shifts to the left.
1. Ceteris paribus means only the price of bus tickets changes; incomes and the price of taxis stay the same.
2. A change in the good's own price causes a movement along the demand curve, so quantity demanded falls.
Answer: The only correct answer is B (1).
- A is not correct because incomes are held constant by ceteris paribus.
- C is not correct because the price of taxis is another variable that is assumed not to change.
- D is not correct because an own-price change is a movement along the curve, not a shift.
In Toralia, the minimum wage rose by 8% in January 2025.
Over 2025, employment in cafés fell by 2% while electricity prices for businesses rose by 30%.
Explain one reason why these data do not prove that the minimum wage caused the fall in employment.
1. Name the reason (K): economics is a social science, so the economist cannot run a controlled experiment that changes only the minimum wage.
2. Use the data (AP): electricity prices for businesses rose by 30% in the same year as the 8% minimum wage rise.
3. Chain (AN): higher energy bills raise cafés' costs, so some cafés may cut staff or close to protect profit.
4. Chain (AN): so the 2% fall in employment may come partly or wholly from energy costs, and the separate effect of the wage cannot be measured without holding other things equal.
Answer: a four-mark answer in the K1 AP1 AN2 shape: the reason, one data point, and a two-stage chain ending at the conclusion.
A model predicts that when the price of a phone falls by 10%, the quantity demanded rises by 15%.
It assumes consumers know all prices and buy the best value.
Explain one strength and one weakness of the model.
1. Strength: by holding incomes, tastes and other prices constant, it isolates the effect of price, so the firm can plan a price cut and estimate the change in sales.
2. Weakness: consumers may not compare prices (they stay loyal to a brand from habit, an idea called inertia), so the actual rise in sales may be smaller than 15%.
Answer: the model is useful for prediction, but its accuracy depends on how realistic the full-information assumption is in this market.
This "useful, but depends on its assumptions" structure is the shape of a good evaluation sentence.
When a question opens with Ceteris paribus, answer only the change it names and say which way it moves the curve or the quantity.
Then, in Examine, Discuss and Evaluate answers, use the phrase as evaluation: "this holds ceteris paribus, but if incomes also rose in 2025 the fall in quantity would be smaller".
That turns a definition into a developed evaluation comment.
- Thinking "social science" means "not a science". Economics uses the scientific method (theory, prediction, testing against evidence); what it lacks is the controlled experiment. Say "cannot conduct controlled experiments", which is the point you need to make.
- Treating an assumption as a fact about the world. Models simplify on purpose. Saying "the model is wrong because people are not perfectly rational" is weak; saying "the prediction may be less accurate in markets where consumers rely on habit" is evaluation.
- Bringing in other changes under a ceteris paribus stem. If the question says ceteris paribus and names a price change, do not add income changes or new competitors. Keep everything else fixed.
- Confusing a movement with a shift. Ceteris paribus, a change in the good's own price moves you along the curve. A change in any other influence shifts the curve, because it breaks the "all else equal" condition the curve was drawn under.
Check your understanding
1. Which one of the following explains why economics is described as a social science? (1)
- A It uses mathematical models and diagrams.
- B It studies the allocation of natural resources.
- C It studies human behaviour, where controlled experiments are generally impossible.
- D It makes value judgements about what governments should do. Total [1]
2. An economist states: "Ceteris paribus, a rise in incomes will increase demand for restaurant meals." Which one of the following is held constant by this statement? (1)
- A The price of restaurant meals.
- B The level of incomes.
- C Demand for restaurant meals.
- D The number of restaurant meals bought. Total [1]
3. A student writes: "Economic models are useless because their assumptions are unrealistic." Explain one reason why the student is wrong. (4) Total [4]
4. Between 2024 and 2025 the price of ferry crossings to Lusca Island rose by 12%, yet the number of crossings rose by 6%. Over the same period tourist arrivals on the island rose by 20%. With reference to this information, explain why the data do not show that demand for ferry crossings slopes upwards. (4) Total [4]
5. In 2025 the Government of Velloria cut the tax on petrol by 10 cents a litre. Over the next year petrol sales rose by 3%, average incomes rose by 5% and the price of electric cars fell by 15%. With reference to this information, examine two reasons why it is difficult to measure the effect of the tax cut on petrol sales. (8) Total [8]
Answers
1. The only correct answer is C (1).
- A is not correct because natural sciences also use mathematical models; this is not what makes economics social.
- B is not correct because studying natural resources does not make a subject a social science; the key is that its subject is human behaviour.
- D is not correct because economics also makes positive statements; value judgements are normative economics, not its definition.
2. The only correct answer is A (1).
- B is not correct because incomes are the variable that changes in the statement.
- C is not correct because demand is the variable being predicted, so it changes.
- D is not correct because the quantity bought rises as a result; it is the outcome, not a constant.
3. Knowledge 1, Application 1, Analysis 2.
- Models are simplifications built on assumptions in order to predict (1K).
- Example: the supply and demand model assumes many buyers with full information (1AP).
- Yet it predicts correctly that a fall in supply, such as a frost cutting a crop, raises the price (1AN),
- so a model is judged by the usefulness of its predictions, not by how realistic each assumption is (1AN).
4. Knowledge 2, Application 2.
- A demand curve shows quantity demanded at each price ceteris paribus, with other influences held constant (1K).
- A change in another influence, such as the number of tourists, shifts the whole demand curve (1K).
- Tourist arrivals rose 20% (1AP), so demand for crossings shifted to the right; the 6% rise in crossings at a 12% higher price is a move to a new equilibrium on a new demand curve, not a movement along one upward-sloping curve (1AP).
5. Knowledge 2, Application 2, Analysis 2, Evaluation 2.
- Reason 1: other variables changed at the same time, so ceteris paribus does not hold in the data (1K). Higher incomes raise demand for petrol, so part of the 3% rise in sales may be due to incomes, not the tax cut (1AN).
- Reason 2: economics cannot run a controlled experiment, because there is no identical Velloria without the tax cut to compare with (1K). Cheaper electric cars reduce demand for petrol, pulling sales the other way, so the separate effect of the tax cut is hidden (1AN).
- Application: incomes rose 5% (1AP); electric car prices fell 15% (1AP).
- Evaluation (2+0 or 1+1): statistical methods can estimate the separate effects if data on many years exist; the effect of cheaper electric cars may be small in the first year because people replace cars slowly, so most of the 3% rise may still be due to the tax cut and higher incomes.