To Be Useful,an Economic Model Must

question 124

Multiple Choice

To be useful,an economic model must

• A)predict accurately all of the time.
• B)predict more accurately than other models developed to analyse the same phenomena.
• C)explain and predict the behaviour of every individual consumer or business.
• D)only include assumptions that have been verified by empirical testing.

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Definitions:

Surplus

The situation where the quantity of a good or service supplied exceeds the quantity demanded at the current price.

Shortage

A situation where the demand for a product exceeds its supply at a specific price.

Quota Rent

The economic rent a producer earns from the difference between the market price of a good and its supply price due to a quota limit.

Equilibrium Price

The price at which the quantity of goods supplied is equal to the quantity of goods demanded.