Economics is a subject which is directly related to the day to day social and financial situations of a country. But, while applying the core subjective matters of Economics to the society, the economists try to find out well whether the particular economic conditions are suitable for the community or not; i.e., what can be the causes as well as the effects of the economic conditions on the society. This analysis is possible through the study of economic models.
An economic model is entirely a construction based on a hypothesis which is obtained by using quantitative variables. The variables have logical correlations as it uses simple mathematical and technical methods to establish a complicated process in a logistic and simplified way. Economic models have the characteristics to generate different properties too.
ii. The hypothesis obtained from the economic model application can find out appropriate assumptions which can be further drawn to conclusions.
iii. It is the construct which relates a communication of the future economic conditions on the society regarding its cause and effects.
iv. Economic models present the guidelines or path for newer commercial inventions.
v. Economic models play its role on all the three levels of the society- household, organization or companies and the political or national.
vi. It helps in the trading, planning, and allocation of resources, investments, producing logistics, developing business leadership, etc.
i. Visual Economic models- Visual model refers to those techniques of the economy where the non-essential and useless resources or products are discarded merely so that the whole concentration and development can be based on the quality based resources and in a simplified manner.
ii. Mathematical Economic models- Mathematical economic model is firmly based on the principles and methods of Maths from where various economic theories are being drawn for the investigation of economic difficulties.
iii. Empirical Economic models- This model has high dimensional and non-constant features for which the conclusions cannot be drawn by prior reasoning. This model is based on the theory of evaluation.
iv. Simulation Economic models- This model is used in business planning and finance. Through this model, you can easily specify, solve and estimate all the other large non-linear models as there is a set of many equations, programming statements, etc. which are present in the SAS DATA step.
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