IB Economics HLTopic 1 — Introduction to EconomicsPaper 1 & 2Core idea~8 min read
Why Economics Is a Social Science
Economics is not chemistry. You cannot put an economy in a test tube, repeat the experiment on Tuesday and get exactly the same answer. Economics studies people — and people change their minds. Once you understand that, almost everything odd about the subject starts to make sense, including why two clever economists can look at the same numbers and disagree completely.
📚 What you need to know
Economics is a social science: it studies people, their choices, and what happens when millions of those choices add up.
Economists cannot run controlled experiments on a whole country, so they build models instead.
A model is a simplified version of reality. It leaves things out on purpose.
Every model rests on assumptions. Judging the assumptions is how you judge the model.
Microeconomics looks at single markets. Macroeconomics looks at the whole economy.
Correlation is not causation: two things moving together does not prove one caused the other.
Disagreement between economists is normal, and the IB rewards you for explaining why they disagree.
What makes a science "social"
Split the sciences into two piles. In one pile you have physics, chemistry and biology. They study things: atoms, chemicals, cells. Those things behave the same way every time. Heat a metal bar and it expands, today, tomorrow and in a hundred years.
In the other pile sit psychology, politics, geography and economics. These study people. People react to the situation they are in, to what their friends do, to a news headline, to a bad mood. Cut interest rates and households might borrow more — or they might panic, decide a recession is coming, and save instead. Same action, opposite reaction, because the people were different or the mood was different.
The one-line version: a chemist can hold everything else still while they change one thing. An economist almost never can, because the economy will not sit still and wait.
This is why economics is a social science. It uses the tools of science — data, logic, hypotheses, testing — but on a subject that refuses to behave predictably. So instead of laws that always hold, economics gives you tendencies: what usually happens, other things being equal.
This is not a weakness of the subject, and examiners do not want you to apologise for it. They want you to be honest about it. A top-band evaluation paragraph almost always ends with a sentence about the limits of the theory you just used.
Why economists build models
If you cannot run the experiment, what do you do? You build a small, tidy version of the situation and reason about that instead. That is all a model is.
Think of a metro map. It shows almost nothing that is really there: no streets, no rivers, no distances, no curves in the track. It is wrong in almost every detail. But it answers the one question you actually have — which train do I take? — better than an accurate satellite photo would. Economic models work the same way. They are not trying to be true. They are trying to be useful.
The things left out of the left-hand panel have not disappeared. They are being assumed not to change — which is exactly what you attack in an evaluation paragraph.
Assumptions: the fine print of every model
An assumption is a simplification you agree to make so the model can work at all. Some common ones you will meet this year:
Consumers are rational and pick whatever gives them the most satisfaction.
Firms are trying to make as much profit as possible.
Everybody has the information they need to choose well.
Everything not being studied is held constant (ceteris paribus).
None of these is fully true. People buy things on impulse and regret it. Firms chase market share or reputation instead of profit. Buyers often know far less than sellers. That does not make the models useless — it tells you where they will break, which is the most valuable thing you can know about a model.
Whenever a question uses the command word evaluate, discuss or examine, one easy route to the top band is: state the theory, apply it, then challenge one assumption behind it and say what changes as a result.
Micro and macro: two zoom levels
Economics is usually split in two. It is the same subject with the camera set to a different zoom.
The split is about the size of the question, not the difficulty. A minimum wage question can be micro (one labour market) or macro (unemployment across the country) depending on how it is asked.
Correlation is not causation
This is the single easiest way to lose marks in a data response, and the single easiest way to gain them.
Suppose you find that towns with more bookshops also have higher average incomes. Do bookshops make people rich? Almost certainly not. Both are probably caused by something else: towns with more university graduates have more readers and better-paid jobs. The bookshops and the incomes move together, but neither one is driving the other.
In a data response, spotting the hidden third variable is worth more than describing the numbers you were given.
Why economists disagree
Give two economists the same data set and they can reach opposite conclusions. That is not because one of them is bad at maths. It is because before you analyse anything you have to decide which variables matter and which you will ignore — and reasonable people choose differently.
One economist studying youth unemployment might focus on wage levels and hiring costs. Another might focus on the quality of schooling and the number of apprenticeships. Both build a defensible argument. Both are looking at the same country. They just drew the boundary of the problem in different places.
Use this in essays. “Economists disagree” is a weak sentence on its own. “Economists disagree because they include different variables and start from different assumptions about how people behave” is a marks-scoring sentence.
Worked examples
WORKED EXAMPLE 1
Explain why economics is classified as a social science. [4]
Point 1: what it studies
Economics studies human behaviour — the choices households, firms and governments make — not physical matter.
Point 2: why that changes the methodControlled experiments are not possible because you cannot hold a whole economy still while changing one variable.
Point 3: what economists do instead
They build simplified models based on assumptions, and test them against real-world data.
Point 4: the consequence
Results are tendencies rather than fixed laws, so the same evidence can support different conclusions.
4 clear points, one sentence each = 4 marksDo not write a paragraph about physics. Two words of contrast is enough.
WORKED EXAMPLE 2
State whether each is microeconomics or macroeconomics: (a) the effect of a sugar tax on soft drink sales; (b) the rate of inflation in Kenya; (c) why nurses are paid less than pilots; (d) the level of national unemployment. [4]
The test: one market, or the whole economy?
(a) One product, one market → micro
(b) An average price level for a whole country → macro
(c) Two individual labour markets → micro
(d) A total for the entire economy → macromicro, macro, micro, macroWatch for the word “national”, “average” or “total” — they almost always signal macro.
WORKED EXAMPLE 3
A study finds that countries with more mobile phones per person have faster economic growth. A student concludes that giving out phones would raise growth. Explain one weakness in this reasoning. [3]
Step 1: name the error
The student has treated a correlation as if it were causation.
Step 2: offer the alternative explanation
Richer, faster-growing countries can afford more phones — so growth may be causing the phones, not the other way round.
Step 3: or point to a third variable
Both could be driven by better infrastructure and investment.
Correlation does not prove the direction of causeNaming the error is 1 mark. Explaining why it is an error earns the other 2.
💡 Exam tip
Learn one definition of a model: “a simplified version of reality built on assumptions”. It appears in dozens of mark schemes.
Attack assumptions, not conclusions. “The model assumes consumers are rational, but many purchases are impulsive” is far stronger than “this model is unrealistic”.
Keep a stock evaluation sentence ready about ceteris paribus: the prediction only holds if nothing else changes, and in reality other things do change.
In data response, never describe a trend and stop. Say what might be causing it and what else could explain it.
Sort the question before you answer it. Deciding micro or macro tells you which diagrams are even allowed.
Use real examples. One named country or product turns a generic answer into a credible one.
⚠ Common mix-up
Thinking “social science” means “not proper science”. It means the subject matter is people, so the method has to be different.
Calling a model wrong because it is unrealistic. Every model is unrealistic on purpose. The question is whether the simplification still gives a useful answer.
Confusing an assumption with a conclusion. Assumptions go in at the start; conclusions come out at the end.
Treating any national statistic as micro because it mentions one industry. If it is a country-wide total, it is macro.
Writing “correlation is not causation” and stopping there. You must say what the alternative explanation is.
Assuming ceteris paribus means other things never change. It means we are pretending they do not, so that we can isolate one effect.
Up next: Scarcity, Choice and Opportunity Cost — the problem that every single thing in this course is a response to.
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