Learn Before
Choosing the Right Economic Model
An economist is studying the likely impact of a new rent control ordinance in a single large city. They have two models available:
- Model A: A complex model of the national housing market that includes variables for federal interest rates, national construction material costs, and country-wide demographic shifts.
- Model B: A simpler model that focuses only on the city in question, using variables for local average income, the number of rental units in the city, and current vacancy rates.
Which model is likely to be more useful for answering the economist's question? Justify your choice by explaining the principle that guides the selection of an appropriate economic model.
0
1
Tags
Social Science
Empirical Science
Science
Economy
CORE Econ
Economics
Ch.2 User-centered design process - User Experience Design - Winter 23 @ UI Design in UI @ University of Michigan - Ann Arbor
UI Design in UI @ University of Michigan - Ann Arbor
User Experience Design - Winter 23 @ UI Design in UI @ University of Michigan - Ann Arbor
UI @ University of Michigan - Ann Arbor
User Experience Design @ UI Design in UI @ University of Michigan - Ann Arbor
University of Michigan - Ann Arbor
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.2 Technology and incentives - The Economy 2.0 Microeconomics @ CORE Econ
Analysis in Bloom's Taxonomy
Cognitive Psychology
Psychology
Related
Assessing a Model's Fitness for Purpose
An economist develops a model to predict how a 10% increase in the national minimum wage will affect the unemployment rate among teenagers. The model includes factors like the average cost of labor, the number of available low-skill jobs, and teenage population demographics. A critic dismisses the model, stating it is useless because it completely ignores the impact of international trade agreements on the overall economy. Based on the principle that a model's value is determined by its specific purpose, how should the critic's argument be evaluated?
Evaluating Economic Models for the Housing Market
Choosing the Right Economic Model
An economic model that accurately predicts the overall inflation rate for the next five years is necessarily a good model for determining the specific impact of a new sales tax on a single industry.
Match each economic question with the simplified model best suited to answer it, based on the principle that a model's utility is determined by the specific question it is designed to address.
Evaluating the Application of a Macroeconomic Model
Designing a Focused Economic Model for a Soda Tax
A team of urban planners develops a sophisticated computer model to predict traffic flow and congestion on city highways. The model incorporates variables such as the number of lanes, average vehicle speed, time of day, and accident rates. A city council member suggests using this exact model to determine the optimal location for a new hospital. Which of the following statements provides the most accurate analysis of this suggestion?
An economist develops a model to predict the short-term (next 6 months) impact of a central bank's interest rate changes on consumer spending for large appliances. The model, which only considers the interest rate and average disposable income, has accurately predicted this specific spending category for the past two years. A financial journalist criticizes the model, arguing it is fundamentally flawed because it omits crucial variables like long-term consumer confidence and international trade balances. Which of the following statements provides the most robust evaluation of the journalist's criticism?