An economic theory seeks to:
A) distort reality in order to improve forecasting ability.
B) predict phenomena without explaining them.
C) explain phenomena without predicting them.
D) include every detail and interrelation among variables that are being analyzed.
E) capture the important elements of the problem under study.

Question

Quizplus · Accepted Answer

An economic theory seeks to capture the important elements of the problem under study. It provides a simplified representation of the real world, highlighting the essential variables and relationships that give rise to the observed economic phenomenon. While it does not include every detail or interrelation among variables, it aims to provide a coherent and logical framework for understanding the behavior of economic agents and the functioning of markets. The theory can be used to make predictions, but its primary goal is to explain phenomena by identifying the underlying causes and mechanisms that drive economic activity.

An Economic Theory Seeks To