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Economics and supermodels

Economics is a social science and looks at behaviour. A key part of what economists therefore try to do is to predict behaviour. To help them with this, they use techniques similar to those used in the natural sciences. Economists construct models to help them to explain and then predict behavior.

The models that economists use may be of the whole economy, or they may simply be of a part of the economy. For example, economists use the model of demand and supply to try to model the bahviour of an individual market. This is a microeconomic model and helps them to explain and preedict the way in which prices will move with changes in the levels of demand and supply. To try to explain the behaviour of the whole economy, they may construct a mathematical model of the whole economy - this is a macroeconomic model.

To construct a model it is necessary to draw up hypotheses about behaviour. These hypotheses can then be tested by observations and testing economic data. For example, we may draw up a hypothesis that when personal income rises, demand will also rise. This hypothesis can then be tested using empirical data from various economies and various different products to see if the data matches the hypothesis. This process is called induction; developing theories from observations of specific variables.

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