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Models

The use of models is a very popular technique in economic anyalysis. Amodel is a physical specification a prototype of an object like the model of an education building, the model of a car, etc. In technical sense, a model is a system or relationship which helps us in understanding the reality.

Iconic Models: There are pictorial or visual representations like drawing, design, prototype etc., which provide information to management.

Analogue Models: Such models present a set of properties of the data in a form which is easily examinable to analysis, e.g., a flow statement, statistical distributions such as binomial, poisson, normal, etc.

Mathematical Models: In these models, relationships are expressed in mathematical symbols and equations .Such models are extensively used in economics analysis. These may be further classified as under:

Economics Models: Economists often postulate the basic structural relationship of a market in the form of a “micro market model” or the structure of an aggregate economy in the form of a “macro aggregative model”.

Econometrics Model: Econometrics is a discipline combining theory, statica method and mathematical precision. A model is a statement of a relation which can be stated among variables, exogenous and exogenous and constant parameters. Relations are stated in from of equations.