Consider an economic model designed to analyze the purchasing decisions of households.An assumption that a household chooses between only two goods would be an example of a
A) simplifying assumption
B) critical assumption
C) macroeconomic assumption
D) financial assumption
E) positive assumption

Question

Quizplus · Accepted Answer

The assumption that a household chooses between only two goods is a simplifying assumption because it simplifies the analysis by reducing the number of variables involved in the decision-making process. This is a common technique used in economic modeling to make the analysis more manageable and easier to understand.

Consider an Economic Model Designed to Analyze the Purchasing Decisions