University:
Loyola University Maryland
Course:
EC 102 | Microeconomic Principles
Academic year:

2024
Views:

115

Pages:

2
Author:

Natasya J.

Theoretical Models A modern economy is a com. plicated entery. Thousands of firms engage in producing mil. lions of different goods. Many mullions of people workin all sort of occupations and make decision! about which of these goods tobuy. Let's use peanuts as an example Peanurs must be harvested at the right tume and shipped to process. ots who turn them into peanut butter, peanut all, peanut britt , and numerous other peanut dellcacies. These processors, in tur , must make certain that their products arrive at thousands o retail outlets in the proper qu- antities to meet demand. Because it would be impossible to describe the features of even these peanur markaers in complete detail, economists have chosen to abstrüct from the complexitles of the real world and develop rather simple models that capture the "essentials". Just as a rood map Is helpful even though it does not record every store, econome models of, say the market for peanuts are also use ful even though they do not record every minute fea- ture of the peanut economy. We wall study the most widely economic models. We wll see that even though these models often make herole ole stractions truen the complextties of the real world, they nonetheless capture essenti features that are common to all economic activities. The use of models is widespread in the physical and social suences. In physies, the notion of a "perfect" vacuum or an " ideal gas is an als- traction that permits scentists to study reatworld phenomena in simplified settings.