Key Idea: Topic 1.2 explains how economists think: they build models, use assumptions like ceteris paribus, distinguish positive from normative statements, and acknowledge the limitations of their tools.
✅ Core definitions
Look for 'should', 'ought to', 'better', 'fairer' — these signal normative statements. A positive statement doesn't have to be TRUE — 'the moon is made of cheese' is positive because it CAN be tested.
🔬 Why economists use models
📊 Positive vs normative — the key distinction
Positive statements: 'What IS?' questions. Can be tested with evidence. 'Inflation is 3%' ✓. 'A tariff raises prices' ✓. Economists can agree on these.
Normative statements: 'What SHOULD be?' questions. Based on values and opinions. 'Inflation is too high' ✓. 'The government should cut taxes' ✓. Economists often disagree on these.
⚠️ Limitations of economic models
🤷 Why economists disagree
Strong exam structure: 'This model predicts X, however in reality Y may occur because the assumption of Z may not hold.' This earns evaluation marks consistently.