A Good Economic Model

question 409

Multiple Choice

A good economic model

• A) describes every aspect of the economic world, with no exception.
• B) includes all those features of the world that can be described numerically.
• C) includes only those features of the world that are needed for the purpose at hand.
• D) should not include more than two variables.

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Definitions:

Well-Defined Problem

A problem with clearly specified goals, constraints, and criteria for evaluating solutions, making it easier to identify potential solutions.

Classical Decision Model

A theory suggesting decisions are made with rationality, where all alternatives and outcomes are considered and the best choice is made to maximize utility.

Behaviour Decision Model

A theory that explains how individuals make decisions based on the acknowledgment of available alternatives, possible outcomes, and the implications of their choices.

Cognitive Limitations

Refers to the inherent restrictions in human cognitive capacity, affecting memory, attention, and the ability to process information.