List out 4 simplifying assumptions used in economics!

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934 viewsJanuary 19, 2022Economics

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score 0 · Answer 1 · 2022-01-19T09:30:51+00:00

Economics as we all know is broadly classified into two categories that are-

microeconomics and macroeconomics

Both of them have some certain assumptions on which it is based and these are-

1.Institutional assumptions-These are related with the social, political ,economical assumptions

For example, a capitalist or communist society

2.Structural assumptions -It is related with the topography, nature ,gender, state of Technology etc.

3.Ceteris paribus assumption- it means if other things are held constant for example in law of demand many factors are held constant before defining it.

Psychological assumptions- it is based on the human behavior and the decision making

For example utility, rational choice theory etc.