A-level economics

(AS)
Hugo
Who am I
I was born and raised in Canada
Toronto
I graduated from the University of Toronto, Rotman Commerce
Got my master's degree at the University of Toronto(OISE) as
well for education.
Curriculum Teaching and Learning
Fun fact about me
I have two dogs in Toronto
I made a student club at my university that is still happening today
I enjoy play many sports
Few things we will do over the course
Vocabulary test
Each class, there will be a vocabulary list you must memorize.
At the beginning of each class, we will do a 10 to 15 minutes
vocabulary test.
Around 10 to 15 vocabularies ( depending on chapters)
At the end of the class, I will need you to answer a sample question to
make sure you understand the material ( Around 5 mins)
There will also be homework for you to do. ( The workbook or more)
ECONOMICS AS A
SOCIAL SCIENCE
Chapter 1
Learning objective
Understand that economics is a social science that uses the
scientific method.
Understand that economists build models and theories based
on assumptions.
Understand that the ceteris paribus assumption is used in
building models and drawing conclusions.
Understand the distinction between positive statements and
value judgements
Vocabulary list
Hypothesis
Laws
Causality
Ceteris paribus
Positive statement
Normative statement
What is economics?
Is it a type of science? – Yes.
But is it the same of physics or
biology? – No
Economics is a type of social science
Social sciences (e.g., economics,
sociology) face challenges in applying the
scientific method due to the complexity of
real-world data and the inability to set up
controlled experiments.

What is social science?

Basically, the study of people.
Hypothesis
Both type of science, natural and
social science will have a
hypothesis to start their research.

Hypothesis: A hypothesis
is an assumption, an idea
that is proposed for the
sake of argument so that
it can be tested to see if
it might be true.
Natural science and social science
A lot of students will say they chose economics
because biology is too hard. Or they are not
interested in science at all.

The truth is, you are still doing science. Just social
science.

But what makes social science difficult is that data

collection for these subjects often involves many
factors. Hence, it becomes difficult to isolate
variables and establish causality
Causality
Def: The relationship between
cause and effect.

In economics, it is quite difficult

to conclude that the effect is
caused by the reasons proposed.
This is because different
researchers may have difficult
interpretations for the data,
which will lead to difficult
conclusions.
Example:
For example, differing
interpretations may arise regarding
the impact of government policies
on unemployment rates in specific
regions, with some seeing it as a
failure and others as a success.

Real world example: Is increasing

the minimum wage a good thing for
the society?
Correlation
The analytical relationship
between two units is referred to as
correlation. In other words, it is the
movement of two variables in
relation to each other.

Without logical interpretation,

many people will abuse
correlation.
Correlation
Correlation and
causation
In all model, there are two variable, X and Y.
Independent and dependent.

When two factors seem to happen at the same

time, we say they are correlated.

However further examination has to be done to

know if one causes the other.
Sometimes a third factor causes the other
two.
Causality is a relationship
between two events, or variables,
in which one event or process
causes an effect on the other
event or process.
This is why we have
model in economics
The terms 'theory' and 'model' are often used to
mean the same thing. There is no exact
distinction to be made between the two.
However, an economic theory is generally
expressed in looser terms than a model.
One of the reasons we construct theories or
models is because we want to know why
something is as it is.
What will an increase in minimum
wage cause?
Ceteris paribus
Ceteris paribus is Latin for 'all
other things being equal’

Economic model have this in mind

because things are a lot more
complicated than it seems.
Therefore, to simplify the problem,
we make “all other things being
equal”. Meaning, we choose to not
see it for now.
For example:
For example, in demand theory, economists consider how price
affects the amount demanded by buyers of a good.
To isolate the price factor, they assume that all other factors
that affect demand, such as income or the price of other
goods, remain unchanged.
Then economists see what happens to quantity demanded as
the price of the good changes.
POSITIVE AND
NORMATIVE
ECONOMICS

Positive statements are

descriptive. They make a claim
about how the world is.

A second type of statement is

normative. Normative
statements are prescriptive.
They make a claim about how the
world ought to be.
Positive statement:
"The unemployment rate in the United States is 4.2%."
"Increasing the minimum wage leads to a decrease in
employment among low-skilled workers.”

Can you think of some

Normative
Statement:

"The government should raise the

minimum wage to ensure that
workers can earn a living wage."
"Tax rates on the wealthy should be
increased to promote income
equality.”

Do you see the difference?

Let’s do some practices
1. Which of the following statements is a positive statement?
a) "The government should increase spending on education."
b) "The average temperature in New York City is 20 degrees Celsius in July."
c) "It is morally wrong for companies to pay CEOs excessively high salaries.”

2. Identify the normative statement

a)"Increasing taxes on cigarettes leads to a decrease in smoking rates.”
b) "The government should invest more in renewable energy sources."
c) "Unemployment benefits should be extended to provide support for
those out of work."
More practices
1. Which statement is a positive statement?
a) "The price of smartphones has increased by 10% over the past year."
b) "People should prioritize saving for retirement over spending on luxury items.”
c) "Free trade agreements lead to economic growth and increased prosperity for
all."
2. Identify the normative statement:
a) "The government should implement policies to reduce income inequality."
b) "Supply and demand determine the equilibrium price of goods."
c) "Investing in public transportation infrastructure improves urban quality of life."
3. Which statement is a positive statement?
a) "Rent prices in metropolitan areas tend to rise during periods of economic
expansion."
b) "Animal testing for cosmetic products should be banned.”
c) "Increasing the minimum wage will reduce poverty rates among low-income
workers."
Can you produce it now
Please produce one positive statement and one normative
statement

Topic: minimum wage

THE ECONOMIC
PROBLEM
Chapter 2
Learning objective
Know that nearly all resources are scarce.
Understand that human wants are infinite. Understand that scarce resources
and infinite wants give rise to the basic economic problem- resources have to
be allocated between competing uses.
Know that allocation involves choices and each choice has an opportunity
cost.
Understand that an economy is a social organization through which decisions
about what, how and for whom to produce are made.
Understand that the factors of production - land, labour capital and
enterprise- are combined together to create goods and services for
consumption.
Understand that the rewards to the owners of the factors of production
include rents, royalties, wages, interest and profit.
Vocabulary list
Scarcity
Economic goods
Free goods
opportunity cost
Trade off
Factor of production
Non-renewable resource
Renewable resource
human capital
Working capital
Fixed capital
SCARCITY
What is scaricty:

Scarcity means a resource is

limited.
Almost all resources are limited,
though some are more scarce
than others.
On the other hand, people's
desires are basically unlimited
Two type of
goods
Resources that are scarce are
called economic goods.
Resources that are not scarce are
called free goods.

Can you give me example

of each.
INFINITE
WANTS
Human needs, including material necessities
and emotional fulfillment, are essential for
survival and well-being.
Needs are finite and include essentials like
food, water, shelter, and self-respect.
Human wants, on the other hand, are
unlimited and encompass desires for goods,
services, and experiences beyond basic
needs.
Wants can vary widely across individuals and
cultures but generally include aspirations for
material possessions, social relationships,
personal fulfillment, and societal values.
Because of wants and scarcity, we have
economic
Resources are scarce but wants are infinite. It is this that leads to the basic
economic problem and forces economic agents to make choices.

In essence: economic is the science that focus on resource allocation.

Choices
Every choice involves a range of alternatives
Will you choose to become an accountant, an
engineer or a teacher?
These choices can be graded in terms of the
benefits to be gained from each alternative.
One choice will be the 'best' one and a rational
economic agent will take that alternative.
But all the other choices will then have to be given
up. The benefit lost from the next best alternative
is called the opportunity cost of the choice.
Opportunity cost
Opportunity cost refers to the value
of the next best alternative
that must be forgone when a
decision is made to pursue a
particular course of action.
In other words, it represents the
benefits or opportunities sacrificed by
choosing one option over another.

This comes with another term you

must learn: Trade off
Before the next step, let’s make sure you
understand opportunity cost
If you have $20 and you choose to buy a video game for $20, what is the
opportunity cost of your decision?
Harder
question
Sarah has $50 to spend on either
going to the movies with her
friends or buying a new pair of
shoes. If she chooses to go to the
movies, the ticket costs $12 and
snacks will cost an additional $8. If
she decides to buy the shoes, they
cost $40. What is the opportunity
cost of Sarah's decision to go to
the movies?
Trade off
Trade-off is when you have to give up something you want in
order to get something else you want, because you can't have
both at the same time.

If you want to go to traditional school, you cannot have enough time for A-level
Basic economic problem
Resources are scarce but wants are infinite. It is this that leads to the basic
economic problem and forces economic agents to make choices.
They have to allocate their scarce resources between competing uses.

There are three parts to the basic economic problem

The three questions
for the problem
• What is to be produced?
How is production to be
organised?
For whom is production to take
place?

But how do you really answer

these questions? A system is
needed
An economic system
Economists commonly distinquish four types of
resources available for use in the production
process. They call these resources the factors
of production.

Land
Labour
Capital
Entreprenuer
Land
Land is not only land itself but all natural resources
below the earth, on the ground, in the atmosphere and
in the sea. Everything from gold deposits to rainwater
and natural forests are examples of land.
There are two types of resources
Non-renewable resources, such as coal, oil,
gold and copper, are land resources that once used
will never be replaced. if we use them today, they
are not available for use by our children or our
children's children.
Renewable resources, in contrast, can be
used and replaced. Examples are fish stocks,
forests or water.
A forest is a renewable resource.
Testing your
knowledge
Which one is considered a non-
renewable resource
1. Nuclear Fuels
2. Water
3. Wood
4. Solar
Labour
Labour is the workforce of an economy-
everybody from housepersons to doctors,
teachers and politicians. Not all workers are the
same.
Each worker has a unique set of personal
characteristics including intelligence, physical
capability and emotional stability.
But workers are also the products of education
and training. The value of a worker is called their
human capital.
Education and training will increase the value of
that human capital, enabling the worker to be
more productive.
Capital
Capital is the manufactured stock of tools, machines,
factories, offices, roads and other resources that are
used in the production of goods and services.

There are two types of capitals:

Working or circulating capital is stocks of raw
materials, semi-manufactured goods and finished goods
that are waiting to be sold.

Fixed capital is the stock of factories, offices, plant

and machinery.
Enterprise/entrepreneurship
Enterprise or entrepreneurship is the fourth factor of
production. It is the seeking out of profitable
opportunities for production and taking risks in
attempting to exploit these.
Entrepreneurs are individuals who:
Organize production - organize land, labour and
capital in the production of goods and services
Take risks- with their own money and the financial
capital of others: they buy factors of production to
produce goods and services in the hope that they will
be able to make a profit but in the knowledge that at
worst they could lose all their money and go bankrupt.
Exercise in class
If I want to build an electric car battery factory,
can you list what items will go into the four
factors of production?

Land: do I need to be in the sea or forest?

Labour: what sort of labour do I need?
Capital: What capitals will be needed?
Entrepreneurship/enterpise:
 Of the four factors of
production which one is the
most important?

Ending
Question