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3 (6) - >> Economic Models Trade-offs and Trade TUNNEL...

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Unformatted text preview: >> Economic Models: Trade-offs and Trade TUNNEL VISION N 1901 WILBUR AND ORVILLE WRIGHT BUILT something that would change the world. No, not the airplane—their successful flight at Kitty Hawk would come two years later. What made the Wright brothers true visionaries was their wind tunnelI an appa- ratus that let them experiment with many different designs for wings and control surfaces. These experi- ments gave them the knowledge that would make In fact. you could say that economic theory consists mainly of a collection of models, a series of simplified rep- resentations of economic reality that allow us to under- stand a variety of economic issues. In this chapter, we will look at two economic models that are crucially important in their own right and also illustrate why such models are so useful. We'll conclude with a look at how economists actually use models in their work. heavier-than-air flight possible. A miniature airplane sitting motionless in a wind tunnel isn’t the same thing as an actual aircraft in flight. But it is a very useful model of a flying plane—a simplified representation of the real thing that can be used to answer crucial questions. such as how much lift a given wing shape will generate at a given air- speed. Needless to say, testing an airplane design in a wind tunnel is cheaper and safer than building a full-scale version and hoping it will fly. More generally. models play a crucial role in almost all scientific research—economics Clearly, the Wright brothers believed in their model. 5 a r e '2‘. very much included. 9 WHAT YOU WILL LEARN IN THIS CHAPTER: production possibility frontier and comparative advantage b The difference between positive economies, which tries to describe the economy and predict its behavior, and normative economics, which tries to prescribe economic policy sometimes disagree 23 ...
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