Economic modelsa. are people who act out the behavior of firms and households so that economists can study this behavior. b. are usually detailed replications of reality. c. incorporate simplifying assumptions that often contradict reality, but also help economists better understand reality. d. are useful to researchers but not to teachers because economic models omit many details of the real-world economy.

The assumption is a basic principle in economics. Every model or theory is based on some assumption. It is necessary to make assumptions to understand the functions of the real world.

The most common assumption in economics is Ceteris Paribus or other factors being constant. In studying the relationship between two variables it is necessary to assume other factors affecting the variables as constant. Even though it is contrary to the real-world situations as in real-world all factors keep changing.

It helps in understanding the effect of change in one variable on the other variable easily. If we do not make these assumptions these models will become too complicated and difficult to understand.