Economics as a science

Explain in your own words why economics is called a social science: what it studies, how it works (observe, measure, test) and how it is similar to and different from a natural science like biology. What is special about studying people's decisions?

A shopkeeper on a downtown avenue indignantly states at a neighborhood meeting: "Ever since the city council opened the bike lane six months ago, revenue at my clothing store has dropped by $12\,\%$. The bike lane is ruining local commerce."

1. a) Explain what mistake this shopkeeper makes by attributing the drop in their sales exclusively to the bike lane construction, and relate your answer to the methodological principle of ceteris paribus.
2. b) Design a rigorous study to test whether the bike lane benefits or harms retail sales in the area: state what data you would collect, what time periods you would compare, and what control group you would use to isolate other economic factors (such as inflation, seasonality, or e-commerce).
3. c) If you discover that on a very similar avenue without a bike lane sales fell by $18\,\%$ over the same period, how does the interpretation of the bike lane's impact change? Justify your answer.

Classify these statements into positive (describe what is and can be tested with data) or normative (express opinions on what ought to be):

1. a) 'Youth unemployment exceeds $25\ \%$ in the province.'
2. b) 'The council should lower business rates for shops in the town centre.'
3. c) 'When bus fares go up, fewer people use it.'
4. d) 'Pensions must be raised whatever the cost.'
5. e) 'Last year's inflation was $3\ \%$.'

The news sometimes mixes fact and opinion in the same sentence: 'Youth unemployment, which is a disgrace, rose to $26\ \%$.'

1. a) Split the sentence into its positive part (the fact) and its normative part (the judgement).
2. b) Rewrite the headline twice — once with only the fact and once with only the opinion — and explain what the reader gains when they are separated.

Classify each headline according to two criteria: micro or macro, and positive or normative. Justify your answer for one of them.

1. a) 'Olive oil prices double due to poor harvest.'
2. b) 'Spain should invest more in solar energy.'
3. c) 'Unemployment nationwide falls to $11\ \%$.'
4. d) 'The ice cream parlour in the square closes down due to rent increase.'

The diagram shows the wall display that the school economics club uses to organise the month's news: on one side, those looking closely (microeconomics); on the other, those looking at the country as a whole (macroeconomics). One card is left unplaced.

1. a) The missing card says: 'The government raises the minimum wage nationwide'. State which box it belongs in and explain why.
2. b) Write two new cards for each box with news stories you make up.

Classify each research question as microeconomics or macroeconomics and justify one of them:

1. a) Why has the rent on flats in your city gone up?
2. b) Why is the average rent rising across the whole country?
3. c) How many workers will the industrial estate's factory hire next year?
4. d) Will the Spanish economy grow by $2\ \%$ this year?

A tube map does not look like the real city: the streets are drawn straight and the distances are distorted. And yet, it gets you anywhere. Use this example to explain what an economic model is, what the purpose of simplifying reality is, and what is lost when doing so. Give a typical assumption of economic models (for example: 'all buyers know all prices') and comment on whether it is realistic.

'If ticket prices go up, fewer are sold, ceteris paribus.' Explain what that Latin phrase means ('all other things equal') and why economists use it so much. Give an example where it does not hold true: the price goes up and yet more tickets are sold.

The class wants to know whether it is true that 'teenagers don't read any more', and the teacher suggests checking it the way an economist would.

1. a) Write a hypothesis: a concrete statement that can be checked with data (for example, about how many books a $15$-year-old student reads per year).
2. b) Say what data you would collect at your school and who you would ask so that the sample represents all students.
3. c) Explain why asking your four friends is not enough (your friends are similar to you: the sample ends up biased).

A headline says: 'The month with the highest ice-cream sales is also the month with the most drownings at the beach.'

1. a) Explain the difference between correlation (two things rising at the same time) and causality (one thing causing the other).
2. b) What third variable explains both at once? Think about what ice creams and the beach have in common.
3. c) Make up another example of two things that happen at the same time without one causing the other.

The economics club surveys $200$ students: $150$ say they would buy fruit at break time if the kiosk sold it at $1\ \text{€}$. The kiosk puts it on sale and only $40$ a day buy it.

1. a) Explain two reasons why the survey may have failed (people answer what looks good; stating an intention is not the same as doing it).
2. b) Design how you would repeat the check to get it right: asking what they did yesterday instead of what they would do, or testing for a week with a real price.