Model and changes from reality.
Explanation of Solution
Economy is an actual world, which includes the individuals and set of many laws and regulations that determines the relations between the individuals. The testing of any economic theory in the actual world is very difficult because of the wide diversity in the economy. This is handled through the introduction of the economic models.
The economic model is a theoretical construct with a set of variables and set of relationships between the variables. This theoretical construct represents the abstract of the economy. Since the model is only an abstract, it would not show all the characteristics and details of the real economy whereas it highlights the features that are important to the economy.
The best example for the model is the globe. It shows the main highlights about the continents and the design and scalar size of the seas and oceans but is not as perfect representation of the original. Another example includes the roadmaps and model of human organs.
Economic model: Economic model is an abstract of the reality, which explains the economy through a set of theoretical construct of set of variables and set of relations between the variables.
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Chapter 21 Solutions
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- Answerarrow_forwardM” method Given the following model, solve by the method of “M”. (see image)arrow_forwardAs indicated in the attached image, U.S. earnings for high- and low-skill workers as measured by educational attainment began diverging in the 1980s. The remaining questions in this problem set use the model for the labor market developed in class to walk through potential explanations for this trend. 1. Assume that there are just two types of workers, low- and high-skill. As a result, there are two labor markets: supply and demand for low-skill workers and supply and demand for high-skill workers. Using two carefully drawn labor-market figures, show that an increase in the demand for high skill workers can explain an increase in the relative wage of high-skill workers. 2. Using the same assumptions as in the previous question, use two carefully drawn labor-market figures to show that an increase in the supply of low-skill workers can explain an increase in the relative wage of high-skill workers.arrow_forward
- Published in 1980, the book Free to Choose discusses how economists Milton Friedman and Rose Friedman proposed a one-sided view of the benefits of a voucher system. However, there are other economists who disagree about the potential effects of a voucher system.arrow_forwardThe following diagram illustrates the demand and marginal revenue curves facing a monopoly in an industry with no economies or diseconomies of scale. In the short and long run, MC = ATC. a. Calculate the values of profit, consumer surplus, and deadweight loss, and illustrate these on the graph. b. Repeat the calculations in part a, but now assume the monopoly is able to practice perfect price discrimination.arrow_forwardThe projects under the 'Build, Build, Build' program: how these projects improve connectivity and ease of doing business in the Philippines?arrow_forward
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics Today and Tomorrow, Student EditionEconomicsISBN:9780078747663Author:McGraw-HillPublisher:Glencoe/McGraw-Hill School Pub Co
