Why Do Economists Need to Develop Abstractions

question 233

Multiple Choice

Why do economists need to develop abstractions?

• A) to avoid analyzing real-world economic interactions, which are too complicated to understand
• B) to understand and explain economic behaviour
• C) to avoid committing the fallacy of composition
• D) to distinguish normative economic behaviour from positive economic behaviour

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Definitions:

Substitute Goods

Products or services that can be used in place of each other, satisfying the same consumer needs or desires.

Complementary Goods

Products or services that are used together, where the use or consumption of one enhances the value of the other.

Demand SHIFT

A change in the market demand curve, where at every price level, the quantity demanded of a good increases or decreases due to factors other than its price such as consumer preferences, income, or the price of other goods.

Complement

A good whose demand increases when the price of another good decreases. Examples include a parking lot and shopping mall or a hamburger and a hamburger bun.