Economic Models-index

Economic Models are any simplified representations of reality to better understand real-life situations. With other things equal assumption or, in other words, with all other relevant factors unchanged, economic models allow economists to focus on one change at a time.

The most effective forms of economic modeling are made through the use of "thought experiments," which are simplified hypothetical versions of real-life situations. These "thought experiments" are used in economics with the use of graphs.

These graphs include:

The Production Possibilities Frontier: Used to understand the economic concept of trade-offs
	Comparative Advantage: Used to understand the concept of gains from trade
The Circular-Flow Diagram: Used to better understand the monetary transaction within an economy.

The Principles of Economics Standards that this Site Meets

12.1 Students understand common economic terms and concepts and economic reasoning.

Examine the causal relationship between scarcity and the need for choices.

Explain opportunity cost and marginal benefit and marginal cost.

Identify the difference between monetary and non monetary incentives and how changes in incentives cause changes in behavior.

12.2 Students analyze the elements of America's market economy in a global setting.

Explain the roles of property rights, competition, and profit in a market economy.

12.6 Students analyze issues of international trade and explain how the U.S. economy affects, and is affected by, economic forces beyond the United States's borders.

Identify the gains in consumption and production efficiency from trade, with emphasis on the main products and changing geographic patterns of twentieth-century trade among countries in the Western Hemisphere.

Economic Models | Production Possiblities Frontier | Comparative Advantage | Circular Flow Diagram | Uses of Economic Models