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In economics, a model is a theoretical construct that represents economic processes by a set of variables and a set of logical and/or quantitative relationships between them. The economic model is a simplified framework designed to illustrate complex processes, often but not always using mathematical techniques. Frequently, economic models use structural parameters. Structural parameters are underlying parameters in a model or class of models.[1] A model may have various parameters and those parameters may change to create various properties.[2] In general terms, economic models have two functions first as a simplification of and abstraction from observed data, and second as a means of selection of data based on a paradigm of econometric study. In addition to their professional academic interest, the use of models include Obviously any kind of reasoning about anything uses representations by variables and logical relationships. A model however establishes an argumentative framework for applying logic and mathematics that can be independently discussed and tested and that can be applied in various instances. Policies and arguments that rely on economic models have a clear basis for soundness, namely the validity of the supporting model.
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