assumption

Examples of assumption in the following topics:

• Assumptions

  • Economists use assumptions in order to simplify economics processes so that they are easier to understand.
  • Economists use assumptions in order to simplify economic processes so that it is easier to understand.
  • Examples of such assumptions include perfect information, profit maximization, and rational choices.
  • Economists use the simplified assumptions to understand complex events, but criticism increases when they base theories off the assumptions because assumptions do not always hold true.
  • Assess the benefits and drawbacks of using simplifying assumptions in economics

• Clearing the Market at Equilibrium Price and Quantity

  • A market clearing, by definition, is the economic assumption that the quantity supplied will consistently align with the quantity demanded.
  • This definition requires a variety of assumptions which simplify the complexities of real markets to coincide with a more theoretical framework, most centrally the assumptions of perfect competition and Say's Law:
  • This opportunity cost creates the assumption that money will not go unused.
  • Combining these two assumptions, in a perfectly competitive market the amount of a product or service that is supplied at a given price will equate to the amount demanded, clearing the market of all goods/services at a given equilibrium point.

• Theory of Utility

  • The theory of utility is based on the assumption of that individuals are rational.
  • Recalling that utility includes every element of a decision, this assumption is not particularly difficult to accept.
  • The rationality assumption gives a basis for modeling human behavior and decision making.

• The Importance of Factor Prices

  • This model is premised on several assumptions.
  • These assumptions are:
  • If these assumptions are held to be true, the HO-model suggests that the exports of a capital-abundant country will be from capital-intensive industries, and labor-abundant countries will import such goods, exporting labor intensive goods in return.
  • It is important to note that the shifts in factor prices described above are based entirely on the assumptions found in the H-O Model.

• Ceteris Paribus

  • Due to the potential for multiple agents and other known and unknown external activities to be involved or present but not relevant to an analysis, economics employs the assumption of "all else constant," which is the English translation of the Latin phrase "ceteris paribus".
  • When the ceteris paribus assumption is employed in economics, all other variables - with the exception of the variables under evaluation - are held constant.

• Classical Theory

• Milton Friedman

  • The validity of a theory cannot be evaluated on the basis of the reality of the assumptions, rather a

• Supply Schedules and Supply Curves

  • This is due to the underlying assumption that in the long run, supply of a good only depends on the fixed level of capital, technology, and natural resources available.

• The Magic of the Economy

  • The complexity of the dynamics of human motivation and systems has led to the establishment of assumptions that form the basis of the theory of consumer and firm behavior, both of which are used to model circular flow interactions within the economy .

• Duopoly Example

  • The model makes the following assumptions:
  • The model rests on the following assumptions: