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studying economics, before too long you will run into issues and problems that you
will need to graph to solve.
Model is a simplified representation of the world, not intended to be realistic.
Model is a theoretical construct, or representation of a system using symbols, such as
a flow chart, schematic, or equation.
In economics, a model is a theoretical construct representing economic
processes by a set of variables and a set of logical and/or quantitative relationships
between them. The economic model is a simplified, often mathematical, framework
designed to illustrate complex processes.
We frequently use models in sciences such as chemistry and physics. Think of
the model of an atom, with the atomic particles: neutron, proton, and electrons. No
one has ever seen an atom, but there is significant evidence for this model. It is easy
to be critical of economic models, since we are more familiar with economic events.
Both micro and macroeconomics are explained in terms of theories and
models. The most well-known theories are probably those of supply and demand, but
you will learn a number of others.

ASSIGNMENTS

Choose the correct answer.
1 What are the reasons to study economics?
a) to be an informed voter;
b) to understand society and global affairs;
c) to learn a way of thinking;
d) all of the above.

2 Economics is best defined as the study of:
a) financial decision-making;
b) how consumers make purchasing decisions;
c) choices made by people faced with scarcity;
d) inflation, unemployment, and economic growth.

3 Which of the following statements are correct?
a) Economics is a natural science;
b) in large measure, economics is the study of how people make choices;
c) if poverty was eliminated there would be no reason to study economics;
d) Economic analysis can be used to explain how societies, but not individuals,
make decisions.

4 Microeconomics is best described as the study of:
a) the choices made by individual households, firms, and governments;
b) inflation, unemployment, gross national product, and the nations economy
as a whole;
c) how markets interact in the aggregate economy;
d) marginal changes in the economy.

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