GENERAL KNOWLEDGE

Detailed explanation-1: -An economic model is a hypothetical situation containing multiple variables created by economists to help understand various aspects of an economy and human behavior. One of the most famous and classical examples of an economic model is that of supply and demand.

Detailed explanation-2: -Economics has been persistently criticized for its heavy reliance on unrealistic assumptions. Some people reply to this criticism by saying that the unrealistic assumptions of economics result from abstraction from unimportant details, and abstraction is necessary for knowledge of a complex real world.

Detailed explanation-3: -Hypotheses in economics typically specify a relationship in which a change in one variable causes another to change. We call the variable that responds to the change the dependent variable; the variable that induces a change is called the independent variable.

Detailed explanation-4: -But each of these theories can be very useful for yielding significant insights for how a particular market functions. No theory in economics is ever exactly true. The important question is not whether or not a theory is true but whether it offers a useful insight in explaining an economic phenomenon.

Detailed explanation-5: -Economics is a social science, but it is not based on the scientific method. Economics is a social science that describes the factors that determine the optimal allocation of resources subject to the budget constraints of individuals in society.