When Constructing an Economic Model, Economists

question 129

Multiple Choice

When constructing an economic model, economists

• A)rely mostly on their own value judgments and ignore the far more complex world of facts
• B)always try to duplicate reality by including all available information
• C)use assumptions that are true for the individual but never true for the whole economy
• D)must rely on simplifying assumptions that abstract from the complexity of the real world
• E)are primarily concerned with making realistic assumptions

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Definitions:

Lemonade

A beverage made from lemon juice, water, and sweeteners, often homemade and sold during warm weather for refreshment.

Budget Constraint

The limitations on the household's or entity's ability to purchase goods and services, based on their income and prices.

Good X

A placeholder term often used in economics to represent a generic good or product in theoretical models.

Good Y

An alternative characterization of a product or commodity that satisfies consumer needs or desires, often used in comparative analyses.