Part 1 of Essay
erm “an economic model” and outline a model of price and output determination in a free market. Examine the effect of a change in real disposable income on equilibrium price and output. An economic model or theory is a simplified explanation and analysis of economic behaviour. It allows us to predict, and therefore interve ....

Part 2 of Essay
.... is a social science, concerned with people, who have a free will and cannot be made subject to laws. This also explains why many models are generalised, dealing with trends in economic behaviour rather than the choice of the individual, as this varies and is difficult to surmise and predict. A market is a place where buyers and sellers communicate for the purpose of the exchange of a good. In free market, the price of a good can fluctuate, determined by supply and demand. When economists discuss demand, they mean ....