Using and Justifying Simplifying Assumptions in Economic Models
In mathematical economics, general functions are often preferred over specific numerical examples. To ensure these models are tractable, economists make simplifying assumptions, such as the concavity of utility and production functions or the convexity of preferences. It's crucial that these mathematical shortcuts have a sound economic interpretation, reflecting plausible behaviors or constraints. For more rigorous mathematical details on these topics, readers can consult Sections 17.1 to 17.3 of 'Mathematics for Economists: An Introductory Textbook' by Malcolm Pemberton and Nicholas Rau (4th ed., 2015 or 5th ed., 2023).
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.5 The rules of the game: Who gets what and why - The Economy 2.0 Microeconomics @ CORE Econ
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Evaluating a Simplifying Assumption in a Consumer Choice Model
An economist is building a model of consumer choice and assumes that the consumer's utility function is strictly concave. What is the primary economic justification for this mathematical assumption?
Match each mathematical assumption commonly used in microeconomic models to its underlying economic justification.
Match each mathematical assumption commonly used in microeconomic models to its underlying economic justification.
Analyzing a Production Model's Anomaly
Interpreting a Production Model Assumption
An economist is developing a model to understand the consumption patterns of a person addicted to a particular substance. A common simplifying assumption in consumer theory is that the utility function is concave. In this specific context, why might this assumption be problematic?
Evaluating a Model's Predictive Failure
Proposing a Simplifying Assumption for a Public Goods Model
In economic modeling, an assumption is considered justified if it significantly simplifies the mathematical analysis, even if it does not correspond to any plausible real-world behavior or constraint.