scroll to top
Stuck on your essay?
Get ideas from this essay and see how your work stacks up
Word Count: 1,275
Explain what is meant by the term an economic model and outline a model of price and output determination in a free market Examine the effect of a change in real disposable income on equilibrium price and output An economic model or theory is a simplified explanation and analysis of economic behaviour It allows us to predict and therefore intervene if we do not like the outcome of a possible chain of events Theories and models are mainly derived from past responses to similar stimuli or from statistical surveys and this information may not always be accurate as it assumes ceteris paribus or all other things remaining equal For example figures may show that the number of people smoking doubled when the price 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 increased the awareness of the dangers of smoking Such a difference in behaviour patterns can be explained when we consider that economics is a social science concerned with people who have 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 demand When economists discuss demand they mean effective demand or how much people will want and can afford to buy at any given price of a product This means that demand is dependent on price The graph 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
@Kibin is a lifesaver for my essay right now!!
- Sandra Slivka, student @ UC Berkeley
Wow, this is the best essay help I've ever received!
- Camvu Pham, student @ U of M
If I'd known about @Kibin in college, I would have gotten much more sleep
- Jen Soust, alumni @ UCLA