Many economic models are not sufficiently detailed to make precise numerical predictions. What, then, is the value of such models?
What will be an ideal response?
Many economic models are qualitative, not quantitative. That is, although they do not provide numerical predictions, they do permit economists to make predictions about the direction of change. For instance, a simple supply-demand model allows economists to predict whether various events will drive a price up or down. Furthermore, even when an abstract economic model is untestable, it is useful because it strengthens and develops the economist's intuition. By examining a number of simplified but abstract models, the economist develops a sense for what factors are important to a situation and what factors are irrelevant. These models give the economist a "feel" for the answers to more complex economic problems.
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Explain why a monopolist has no supply curve
What will be an ideal response?
Which of the following is true for a constant cost industry? a. It uses a relatively large share of available resource inputs
b. It uses a relatively small share of available resource inputs. c. Industry expansion will put upward pressure on wages and/or other input prices. d. Both a. and c.
A decrease in the price of baseball bats will decrease the demand for baseballs
a. True b. False Indicate whether the statement is true or false
For a fixed target real interest rate and target inflation rate, when inflation increases, the Fed ________ interest rates, hence ________ short-run equilibrium output.
A. decreases; decreasing B. increases; increasing C. increases; decreasing D. decreases; increasing