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1、CHAPTERONEEconomicModelsThemaingoalofthisbookistointroduceyoutothemostimportantmodelsthatecono-mistsusetoexplainthebehaviorofconsumers,?rms,andmarkets.Thesemodelsarecentraltothestudyofallareasofeconomics.Therefore,itisessentialtounderstandboththeneedforsuchmodelsandthebasicframeworkusedtodevelopt
2、hem.Thegoalofthischapteristobeginthisprocessbyoutliningsomeoftheconceptualissuesthatdeterminethewaysinwhicheconomistsstudypracticallyeveryquestionthatintereststhem.TheoreticalModelsAmoderneconomyisacomplicatedentity.Thousandsof?rmsengageinproducingmil-lionsofdifferentgoods.Manymillionsofpeoplewor
3、kinallsortsofoccupationsandmakedecisionsaboutwhichofthesegoodstobuy.Let’susepeanutsasanexample.Pea-nutsmustbeharvestedattherighttimeandshippedtoprocessorswhoturnthemintopeanutbutter,peanutoil,peanutbrittle,andnumerousotherpeanutdelicacies.Theseprocessors,inturn,mustmakecertainthattheirproductsarr
4、iveatthousandsofretailoutletsintheproperquantitiestomeetdemand.Becauseitwouldbeimpossibletodescribethefeaturesofeventhesepeanutmarketsincompletedetail,economistshavechosentoabstractfromthecomplexitiesoftherealworldanddeveloprathersimplemodelsthatcapturethe‘‘essentials.’’Justasaroadmapishelpfuleve
5、nthoughitdoesnotrecordeveryhouseoreverystore,economicmodelsof,say,themarketforpeanutsarealsousefuleventhoughtheydonotrecordeveryminutefeatureofthepeanuteconomy.Inthisbookwewillstudythemostwidelyusedeconomicmodels.Wewillseethat,eventhoughthesemodelsoftenmakeheroicabstractionsfromthecomplexitiesoft
6、herealworld,theynonethelesscaptureessentialfeaturesthatarecommontoalleconomicactivities.Theuseofmodelsiswidespreadinthephysicalandsocialsciences.Inphysics,thenotionofa‘‘perfect’’vacuumoran‘‘ideal’’gasisanabstractionthatpermitsscientiststostudyreal-worldphenomenainsimpli?edsettings.Inchemistry,the
7、ideaofanatomoramoleculeisactuallyasimpli?edmodelofthestructureofmatter.Architectsusemock-upmodelstoplanbuildings.Televisionrepairersrefertowiringdiagramstolocateprob-lems.Economists’modelsperformsimilarfunctions.Theypr
