Economists make assumptions in order to simplify the complex world and make the economy easier to understand.
Work Step by Step
Economies are often highly complex and can depend on numerous factors that are hard to measure. Therefore, economists can make assumptions that simplify the economy in order to understand specific aspects of the economy. For example, to study the effects of international trade, which can involve dozens of countries at the same time, economists can assume that the world consists only of two countries that each produce one good. By considering a world with only two countries and two goods, we can understand how both countries are impacted by trade and then use this to understand the role of international trade in our complex world.