Model

Economic models are simplified versions of reality that allow economists to observe, understand, and make predictions about economic behavior. The purpose of a model is to take a complex, real-world situation and pare it down to the essentials. Economic models can be represented using words or using mathematics. Frequently, economic models posit structural parameters, having variables subjected to change to create various responses by economic variables. Methodological uses of models include investigation, theorizing, and fitting theories to the world.