Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 2 - Part I - Thinking Like an Economist - Questions for Review: 2


Economists make assumptions due to the unpredictability of the economy and the difficulty in conducting experiments.

Work Step by Step

Economists can never be certain of how individuals will react to economic conditions, so they put in place assumptions like the assumption that consumers are rational, to make it easier to create theories. Other assumptions like the ceteris paribus assumption (all other things remaining unchanged) simplify economic theories to clearly show a relationship between two factors, for example, a connection between price and demand.
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