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predictions. The economist usually follows several rules when he makes a model
of economic behaviour.
First, real life is complex and it is not possible for an economist to include
all the details in a model. So, a model is an abstraction from real life. A model
usually includes only essential elements and relationships of a particular
economic situation.
Second, if an economist has two different models of one phenomenon, he
always chooses the model that predicts the results of a particular phenomenon
more accurately.
Third, although models are helpful in economic analysis, an economist
always studies the actual economic situation before he makes decisions.
It is not enough to make models, it is also necessary to collect and study
actual data in order to know how accurate a model is.
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