Principles of Microeconomics, 7th Edition

Published by South-Western College
ISBN 10: 128516590X
ISBN 13: 978-1-28516-590-5

Chapter 2 - Part I - Thinking Like an Economist - Questions for Review: 3


No, economic models rely on assumptions and make simplifications about the economy that allow us to understand the complex workings of the economy.

Work Step by Step

Like a diagram of the human body that only shows the major organs, an economic model often presents a simplified view of the economy. Because the economy is so complex and can be affected by so many small factors, models often must omit minor details and make assumptions about the workings of the economy. By making these simplifications, models allow us to observe the economy in ways that would be too difficult if we tried to observe every specific aspect of the complex economy.
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