List out 4 simplifying assumptions used in economics!
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.