discuss the role of assumptions in the study of economics
Answers
Assumptions provide a way for economists to simplify economic processes and make them easier to study and understand. An assumption allows an economist to break down a complex process in order to develop a theory and realm of understanding.
Explanation:
The assumptions of economists are made to better understand consumer and business behavior when making economic decisions. Some economists assume that people make rational decisions when purchasing or investing in the economy.
A basic assumption of economics begins with the combination of unlimited wants and limited resources. We can break this problem into two parts: Preferences: What we like and what we dislike.
The key assumption of economics (especially microeconomics) is that “individuals allocate their scarce resources so as to make themselves as well off as possible.” This assumption is central to economics; there is an “economic way of thinking” that is different and distinct from the methods of other social sciences.