An economic model
A) uses equations to understand normative economic phenomena
B) often omits crucial elements
C) simplifies reality in order to focus on crucial elements
D) tries to make simple concepts more complex
E) cannot be proven wrong

Question

Quizplus · Accepted Answer

Economic models are designed to simplify complex economic phenomena in order to focus on the crucial elements that are important for understanding real-world economic situations. By reducing a complex phenomenon to its core features, models help to highlight the causal relationships that govern economic behavior. While models inevitably omit some details and information from reality, this is done in order to create a useful framework for analyzing economic problems and making predictions about how people will behave in different scenarios.

An Economic Model