Assignment 2: experiment with model of something. Tell what you
learned about that thing from those experiments.
LIMITATIONS OF MODELS
1- Models simplify the real economy. The key variables with the most importance are put and others are omitted. The omitted variables often do matter in the real economy and may prevent the production of precise or accurate results.
2- Models must be tractable. Tey are useless unless they can be solved.
Answer: The best example of the economic model for learning is the classical model of demand & supply that can be used in daily life.
According to the law of demand: when price increases demand decreases & when price decreases demand increases with the assumption of other things remaining constant.
Other things remaining constant include income, price of related goods taste & preference, technology, etc. However, if we see in a real scenario that is not the case, it is impossible to find any situations where demand increases with price increases & other factors are constant.
Learning:The assumption of other things remaining constant in this dynamic world is impractical and outdated.
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