The very first step to the economic model is \"the role of assumptions, and that
ID: 1133819 • Letter: T
Question
The very first step to the economic model is "the role of assumptions, and that is already unrealistic. Something that is assumed is unrealistic. For a certain amount of time going based off behavioral assumptions may be slightly correct, but it won't stay constant. Society is always changing. Some of the ways used are for the environment, health care, and poverty, those three topics can change one minute to the next. models are A good model can be easily read. A person should be able to do the calculation of a slope and figure out what the outcome would be if something increases or decreases. I came across a model about "Health System Tracker." This diagram shows the spending of Medicaid and Medicare from 1970s to 2025 of medical expense and prescriptions. When looking at the "Health System Tracker it shows what's being spent, the time frame, and how much. In the "Health System Tracker," you can see that in the earlier years Medicaid and Medicare spent more on prescriptions and health care compared to today. Throughout the years it has gone up and down, also switching which expense increased and decreased. The actual slopes show all these changes while the projected is showing a non-changing.Explanation / Answer
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Answer-
In the example quoted we can see that the prediction done for medical expense under the Medicare and Medicaid schemes have not matched and the figures are totally against or different from what was predicted. This will happen with most of the economic models and in many cases by statistic model as well the reason behind is that the model tries to predict the phenomenon and does not tries to match the actual result. More or less we can say the models be like a budget of the company or a country no one knows if it will match in the end or not. However the models are based on assumptions and tries to extract the values it has from the assumptions. And these assumptions are arrived at after deductions and research done by the people developing the model. Therefore we can say that the assumptions are correct and the maximum we can do with a model is use for prediction, which may or may no match. Hence we can say that we disagree with the information provided and can say that models are good predictors of a future event but not a evidence of the same.
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