Which of the following statements about economic models is TRUE?
A) The best economic models must be most 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

All economic models are based on a set of assumptions, as these models simplify the real world to make it possible to analyze and understand economic concepts. While complexity can be a factor in a model's validity, it is not necessarily indicative of its quality or accuracy. A good model will also rely on realistic assumptions and be able to explain and predict real-world economic phenomena. Economic models are not designed to explain what people need, but rather to understand how they behave in relation to economic choices and incentives.

Which of the Following Statements About Economic Models Is TRUE