Macroeconomics › Section A · Welcome to economics › Topic A.3
How economists use theories and models
No economist can track every buyer, seller and product in an economy. So the subject runs on deliberate simplification: theories and models that keep the few features that matter and drop the rest. This topic shows how they are built, what the ceteris paribus assumption does, and how to tell a testable claim from an opinion.
In this topic
- Why economists simplify
- Theories and models
- Assumptions and ceteris paribus
- Positive and normative statements
- Worked example: sorting claims
- A first model: the circular flow diagram
- Reading the two loops
- Worked example: tracing one week at a bakery
- Models as a toolkit
- Common mistakes to avoid
- Key takeaways
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