## Economic Models

### Try It

Question1

A key feature of some economic models is linearity, or whether the variable of interest changes in constant proportion with another associated variable (meaning they exhibit a linear or constant straight line relationship) or whether the change in the variable is not a constant proportion but varies more or less depending on the level of the associated variable (meaning they have a non-linear or curved line relationship). Which of the following is the most effective way for an economist to support such a relationship?

- Apply knowledge of economic theory to assert the form of the relationship.
- Plot projected future data points of each variable against each other in a graph to visualize the potential future form the relationship.
- Conduct behavioral experiments and make quantitative observations that indicate the form of the relationship.

Question 2

One important use of algebraic modeling of economic behavior is to determine the direction of the relationship between two economic variables – say the quantity of X that is purchased and the price paid for X. If, as the price of X rises, the quantity of purchases fall, the relationship can be said to be ________.

- negative
- positive
- constant