The Art of Building Economic Models Essay Example
The Art of Building Economic Models Essay Example

The Art of Building Economic Models Essay Example

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  • Pages: 2 (386 words)
  • Published: November 24, 2016
  • Type: Essay
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When creating a model, determining which details to include and exclude can be challenging. The level of detail necessary in a model depends on its purpose. However, there is a guiding principle to follow: a model must contain only the essential details. To illustrate this concept, consider a map. A map is a model that represents a portion of the earth's surface, yet it omits numerous real-world details. For instance, maps are two-dimensional and do not incorporate the third dimension of height.

In addition, maps overlook smaller features like trees, houses, and potholes. Moreover, maps have a much smaller scale compared to the actual area they represent. However, when purchasing a map for a specific purpose, such as finding the optimal route from Logan Airport to the downtown convention center in Boston, a highly detailed city map is


necessary. This detailed map should accurately depict and label every street, park, and plaza in Boston. Conversely, a highway map that disregards these specific details would not be suitable for this purpose.

Suppose you have a different goal, which is to find the optimal driving route from Boston to Cincinnati. In this case, you would require a highway map that displays only the necessary streets. Including every street between Boston and Cincinnati would be excessive and would hinder the clarity of the map. This same principle applies to economic models, which are more conceptual than road maps. The appropriate level of detail for one purpose will typically be either excessive or insufficient for another.

The purpose of the models presented in this text, specifically in introductory economics, is purely educational. These model

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aim to enhance your understanding of the fundamental principles that drive the economy. By keeping the models simple, it enables a clearer observation of these principles and aids in their retention. It is crucial to remember that economic models serve other purposes beyond education as well.

The use of models in economics is beneficial for businesses, households, governments, and international agencies. These models assist in determining pricing and production decisions for businesses, guiding investment choices for households, and formulating policies for governments and international agencies. Although more detailed models are developed for these purposes, this learning module focuses on the basic framework used in all models, which will be further explored in advanced economics courses.

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