economic model

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A theoretical construct designed to analyse the behaviour of economic agents using quantitative and logical methods. A model can be formulated verbally and/or in the form of equations and/or diagrams, and is composed of a list of variables that characterize the economic agents and the economic environment under consideration, and a list of assumptions about their interaction. A model assigns objectives to economic agents and specifies constraints on choices. An economic model is always a simplified representation of the real world, and the choice of the degree of simplification is dictated by the focus of the research and the availability of relevant information.

Subjects: Economics.

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