The role of an assumption in an economic theory is to:
A) add realism.
B) prove the theory.
C) increase the scope of application.
D) simplify the theory.

Question

Quizplus · Accepted Answer

The role of an assumption in an economic theory is to simplify the theory by providing a simplified view of the real world. Assumptions are necessary to make a model more manageable and reduce its complexity. By assuming certain conditions, economic theories can focus on the key elements of a problem and develop predictions about how the economy will behave. However, there is always a tradeoff between simplicity and accuracy, and economic models may not always reflect the complexity of the real world.

The Role of an Assumption in an Economic Theory Is