"Assume that all individuals have perfect information about prices now and in the future, that they have identical tastes, that all markets are competitive, and that there is no government." This statement is indicative of how economists
A)apply the law of supply and demand.
B)employ marginal analysis.
C)are prevented from getting correct answers.
D)abstract for analytic purposes.
E)use realistic assumptions to develop theory.

Question

Quizplus · Accepted Answer

The statement suggests that economists are abstracting for analytic purposes by assuming perfect information, identical tastes, competitive markets, and the absence of government intervention. These assumptions allow economists to simplify the complexity of the real world in order to develop theory and draw conclusions about economic behavior.

"Assume That All Individuals Have Perfect Information About Prices Now