Conceptual understandings

  • Economics is a social science characterized by interdependence, which focuses on how people interact with each other to improve their economic well-being, influenced and enabled by their values and their natural surroundings.
  • The economic world is dynamic in nature and constantly subject to change.
  • Economic theories are based on logic and empirical data, using models to represent and analyse this complex reality. Individual and collective motivations and behaviours are complex and diverse, and their understanding entails the interaction of a variety of disciplines such as philosophy, politics, history, and psychology.
  • Economic decision-making impacts the relative economic well-being of individuals and societies.
  • The central problems of economics are scarcity and choice. This forces societies to face trade-offs, opportunity costs and the challenge of sustainability.
  • Debates exist in economics regarding the potential conflicts between economic growth and equity and between free markets and government intervention.
  • Endless economic growth, based on the consumption of finite resources, cannot continue indefinitely. New economic models and social movements have challenged mainstream opinion about the purpose of growth and how the economy could be redesigned to support long-term prosperity.

Key concepts: scarcity, choice, efficiency, equity, economic well-being, sustainability, change, interdependence, intervention.

TopicSL/HL Content
What is Economics>> Economics as a social science;
>> The problem of choice;
>> Opportunity cost;
>> The basic economic questions;
>> Means of answering the economic questions;
>> The production possibilities curve model (PPC);
>> Modelling the economy.
How do economists approach the world>> Economic methodology;
>> The role of positive economics;
>> The role of normative economics;
>> Economic thought;

Theory of knowledge questions

• How realistic are economic models? How can we know what to include or exclude in a model?
• What assumptions do economists make when they apply economic theories to the real world?
• Many economists argue that economics as a social science is in its infancy, and that with time, as empirical testing methods and the quality of data improve, it will become more reliable in making accurate predictions. Do you agree with this statement?
• To what extent does the distinction between positive and normative statements exist in other academic disciplines?
• To what extent have individuals shifted the paradigms of economics?