Theories Scientific studies and discoveries come about after a well-thought-out hypothesis and thoroughly conducted experiments that produce models and theories. Students may encounter countless models and theories of famous scientists who once aimed to explain the different phenomena. The definitions of the two terms can be confusing. Students may come up with both models and theories after performing the step-by-step process of scientific methods; however, models and theories are produced in different periods and levels of the study.
In this essay we will discuss about Economic Models. After reading this essay you will learn about: Meaning of Economic Model 2. Nature of Economic Model 3. Building a Micro-Static Model 5.
Choice Among Economic Models 7. Meaning of Economic Model: An economic model is an organised set of relationships that describes the functioning of an economic identity under a set of assumptions from which a conclusion or a set of conclusions is logically derived.
The economic identity may be a household, a single industry, a region, an economy or the world as a whole. As a matter of fact, an economic model is a set of economic relationships which is generally expressed through a set of mathematical equations.
Each equation involves at least one variable which also appears in at least one other relationship which is part of the model. Nature of Economic Model: An economic model is a deliberately simplified representation of the real world.
Instead of representing a real situation, it explains the essential relationships that are sufficient to analyse and explain the main features of the particular situation at hand.
The relation of a model to reality is through its assumptions. But assumptions do not exactly represent reality. If the assumptions of a model are somewhat realistic, the conclusion that is drawn can be shown to apply to the real world situation.
However, abstraction does not imply unrealism, but is a simplification of reality. An economic model may be compared to a map which does not show every aspect of the terrain but only those features that are of interest for the particular situation at hand.
The map is not the territory. Nor is the model the real world. But neither can be understood without a map or a model. An economic model, like a map, pinpoints the particular situation and keeps it free from many complicating and irrelevant factors found in the real world like the real territory in a map.
A model is built for two main purposes: Analysis means breaking up a thing into the elements that go to make it.
We analyse a phenomenon into its various elements.1. Microfinance and Economic Development. Robert Cull, World Bank.
Jonathan Morduch, New York University. October 17, Abstract: Microfinance is generally seen as a way to fix credit markets and unleash the productive capacities of poor people dependent on self-employment. Published: Mon, 5 Dec Unrelenting poverty, and apparent shifts in the modeling of the poverty problem have led to policy makers and developmental scholars diverting increasingly scarce resources to better, more effective means of extracting a billion of the worlds poor from the maws of destitution and its ridding effects (Morduch, ).
The Economic Importance of Financial Literacy: Theory and Evidence Annamaria Lusardi and Olivia S. Mitchell NBER Working Paper No. April JEL No. D91 ABSTRACT In this paper, we undertake an assessment of the rapidly growing body of research on financial literacy. 3. The model speaks to an important application.
For example, applying matching theory to school choice is important because of the economic significance of the application;. The scope of this essay is to analyze the theory of microfinance, by studying the ideologies of Muhammad Yunus, founder of such economical phenomenon, and assessing the attempts of Pangea Onlus to the extent of helping its clients reach out of the poverty trap.5/5(7).
Last year, the American Economic Review put together last year a list of its most important papers during its year existence. Read on to see that list (in no particular order).