Explain What Is Meant By The T :: essays research papers

Explain what is meant by the barrier an economic model and outline a model of value and produce determination in a free foodstuff. Examine the effect of a change in real disposable income on equilibrium value and output.An economic model or theory is a simplified history and analysis of economic behavior. It allows us to predict, and therefore intervene, if we do not same the outcome of a possible chain of events.Theories and models atomic number 18 mainly derived from aside responses to kindred stimuli or from statistical surveys, and this information may not perpetually be accurate as it assumes ceteris paribus, or all other things expect equal. For example, figures may show that the number of spate smoking doubled when the monetary value of cigarettes halved in the 1960s. This does not mean to say that following a similar price reduction today, the response would be the same, as advertising has increase the awareness of the dangers of smoking. Such a difference in behaviour patterns arse be explained when we consider that economics is a social science, concerned with people, who gain a free will and cannot be made subject to laws. This also explains why many models are generalised, dealing with trends in economic behaviour rather than the choice of the individual, as this varies and is difficult to surmise and predict.A market is a place where buyers and sellers communicate for the purpose of the exchange of a good. In free market, the price of a good can fluctuate, determined by supply and require. When economists discuss pray, they mean effective demand, or how much people will want, and can afford to buy at any given(p) price of a product. This means that demand is dependent on price. The represent above is a demand curve that illustrates that as price rises, demand falls. This enables movement along the curve, which we term an expansion or contraction of demand, depending on the direction of this movement. Like most economic models , it is simplified and assumes ceteris paribus that price and demand have an inversely proportional descent. This theory does not account for goods which are nesscessities or that have few close substitutes, for whom demand may remain constant with price changes.Similarly, there is a supply curve that shows the relationship between price and supply. The economic theory here is that the higher price a good commands, the higher your profit margin will be (assuming costs of production remain constant).