The Purpose of Making Assumptions in Economic Model Building Is

question 43

Multiple Choice

The purpose of making assumptions in economic model building is to

• A)force the model to yield the correct answer.
• B)minimize the amount of work an economist must do.
• C)simplify the model while keeping important details.
• D)express the relationship mathematically.

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Definitions:

Total Utility

The total satisfaction received from consuming a certain amount of a good or service.

Equilibrium Position

A situation where the supply and demand in the market are equal, leading to stable prices.

Indifference Curves

Graphical representations that illustrate combinations of goods that provide the same level of utility or satisfaction to a consumer.

Demand Curve

A graphical representation showing the relationship between the price of a good or service and the quantity demanded for a given period.