Which of the following statements about economic models is TRUE?
A)A good economic model is complex.
B)A good model does not rely on any assumptions.
C)Every model is based on a set of assumptions.
D)Economic models are designed to explain what people need.

Question

Quizplus · Accepted Answer

Economic models are simplified representations of real-world phenomena, and as such, they need to rely on a set of assumptions to be constructed. These assumptions may include simplifications of the real-world complexity to make the model tractable, or assumptions about individual behavior and decision-making processes. A good model is not necessarily complex, but it has to be grounded in theory and supported by empirical evidence. Economic models aim to explain and predict economic outcomes, not what people need.

Which of the Following Statements About Economic Models Is TRUE