Instead, they use the graph of the theory to help them figure out the solution.Īlthough at the basic level, you can sometimes figure out the right answer without applying a model, if you keep studying economics before too long you will run into issues and problems that you will need to graph to solve. In this course, we will mostly use graphs.) Economists do not figure out the answer to the problem first and then draw the graph to illustrate. In economics, theories are expressed as diagrams, graphs, or even as mathematical equations. Then they use the theory to derive insights about the issue or problem.
When they see an economic issue or problem, they go through the theories they know to see if they can find one that fits. Video: Circular Flow of Income and ExpendituresĮconomists carry a set of theories in their heads like a carpenter carries around a toolkit.
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