Chapter 1.3, Problem 1R

To determine

To Discuss: The importance of Economy, Economy Model and Hypothesis.

Explanation of Solution

In economy taking appropriate business decisions requires a clear understanding of the technical and environmental conditions under which decisions are to be taken.

In Economy model there are mostly two models that are used, which are:

• The law of demand model
• The law of supply model

Hypothesis is assumption which can be tested or analyzed on the basis of observations. Main in elements in hypothesis includes:

• A guess, theory or statement
• Data to be collected during observation

Economics Concept Introduction

Introduction:

Economy theory provides the basis for the decision making process. Since decisions have repercussions on the working of firm in future, and the most firm desire continuing operations over a period of time, forward planning becomes an important element.

Economy model here is concerned with using logic of economics, mathematics and statistics to provide effective ways of thinking about business decision problems.

Hypothesis refers to an observation of economic activities, that is, whether a particular situation stands correct or not.