Question

The beauty of an economic model comes from:______.
a. its ability to represent a complex reality without any simplification.
b. its ability to make clear predictions that are consistent with reality.
c. its simplicity in presenting the essential elements of an otherwise complex reality.
d. b and c.

Answer 1

Answer:

D

Explanation:

An economic model is a simplified abstraction of reality. An economic model aims to present economic reality in a simplified form. it also aims to make accurate prediction consistent with reality.

for example, the law of demand is an example of an economic model.

According to the law of demand, the higher the price, the lower the quantity demanded and the lower the price, the higher the quantity demanded.

this economic model is true because rational human beings tend to purchase more of normal goods when the price is lower than when the price is higher.