An Economic Model

question 136

Multiple Choice

An economic model:

• A) exactly explains what happens in the real economy.
• B) discards unnecessary details to clearly demonstrate the central principles of the economic activity.
• C) approximates all facets of what happens in the real economy.
• D) does not make clear assumptions about the economic activity.

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Definitions:

Demand Curves

Curves that describe buyer behavior and tell you how much consumers will buy at a given price.

Consumer

An individual or group who purchases goods or services for personal use.

Producer

An individual or entity that creates or supplies goods or services.

Marginal Cost

The increase in total cost that arises from producing one additional unit of a product or service.