Chapter1: Introducing The Economic Way Of Thinking
Section: Chapter Questions
Problem 5SQP
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Question
Why is it important for us to use models when studying economics?
Expert Solution
Step 1
In economics a Model is defined as a theoretical construct which represents the economic processes by using a set of variables and set of quantitative relationship between the variables.
So, a model is a mathematical framework which is usually constructed in order to illustrate a complex situation. So, that the users of these models can understand the situations prevailing in the economy in an effective manner.
Therefore the models are usually designed by the economists as they portrays the situation prevailing in the economy or in the market
Step 2
It important for us to use models when studying economics as
- Simplify the reality
- Guides our attention to certain topics
- They make us to understand the economic concepts in an easy and better manner.
- Save our time: as it becomes easy to understand the concept with the help of model
- Exact values can be derives with the help of models.
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