Chapter 3: Q.22 (page 78)

When analyzing a market, how do economists deal
with the problem that many factors that affect the market
are changing at the same time?

Short Answer

Expert verified

Economist consider only one or two factors at a time.

Step by step solution

Step 1.

Economists deal with the problem that many factors that affect the market are changing at the same time by taking only one factor, the rest factors remain constant.

Taking only one factor does not apply to real-life scenarios but it helps for a better understanding of the problem & simplifies the Economic model.

Step 2.For example:

In comparative advantage theory,

the assumptions are-

There are only two countries.
only factor of production is labor.
In reality, these assumptions are unrealistic because one country does trade with many countries with varieties of goods but theory introduces us to opportunity cost which helps in choosing between different options for production.

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When analyzing a market, how do economists deal
with the problem that many factors that affect the market
are changing at the same time?

Short Answer

Step by step solution

Step 1.

Step 2.For example:

One App. One Place for Learning.

Most popular questions from this chapter

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When analyzing a market, how do economists dealwith the problem that many factors that affect the marketare changing at the same time?

Short Answer

Step by step solution

Step 1.

Step 2.For example:

One App. One Place for Learning.

Most popular questions from this chapter

Study anywhere. Anytime. Across all devices.

When analyzing a market, how do economists deal
with the problem that many factors that affect the market
are changing at the same time?