Initial Publication Date: April 12, 2016
What should the student get out of this module?
After completing this module, a student should be able to:
- Understand the importance of economic models.
- Understand the meaning of ceteris paribus.
- Recognize why it is often necessary to assume other things are constant in the context of understanding relationships between economic variables.
- Recognize economic models that are used in microeconomics and macroeconomics.
What we don't include on this page
This module does not illustrate the use of mathematical models and does not address the empirical notion of controlling for other variables in the context of multiple regression analysis.
Why is it difficult for students?
Understanding economic modeling is difficult for students for two reasons.
- Many students are unfamiliar with the basic idea of assessing the effect(s) that one variable may have on another variable in the absence of other factors.
- Students may be uncomfortable with the abstractions from reality that economic models often require. Students typically want to apply concepts to the real world. When we introduce a model with simplifying assumptions that violate their observations of the real world, students may reject the model outright, failing to see the connection between the model's assumptions and understanding of real world phenomena.