Which of the following statements about economic models is true?
A) Economic models are not empirically testable.
B) The predictive power of models is not important.
C) Economic models are designed so that every detail of the real world can be analyzed.
D) Every economic model is based on a set of assumptions.

Question

Quizplus · Accepted Answer

Economic models are simplified representations of the real world, and therefore make a set of assumptions to simplify the analysis. However, these models can still provide useful insights and predictions about economic phenomena. A and B are false statements, as economic models can be and often are empirically testable, and their predictive power is an important aspect of their usefulness. C is also false, as economic models necessarily omit some details of the real world in order to make analysis feasible.

Which of the Following Statements About Economic Models Is True