What is the basis of a good economic theory?
A) It relies on simplifying assumptions in order to explain economic behaviour.
B) It does not rely on simplifying assumptions.
C) It includes every detail that affects the economic behaviour of interest.
D) It relies on conducting uncontrolled experiments.

Question

Quizplus · Accepted Answer

A good economic theory requires simplifying assumptions in order to explain economic behaviour in a more manageable and understandable manner. However, these assumptions must still be grounded in reality and not too simplistic as to ignore important factors that affect economic behaviour.

What Is the Basis of a Good Economic Theory