Explain what is meant by the term an Economic model
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…supply curve, indicating a contraction in quantity supplied. The point at which the curves cross changes and a new equilibrium price is set. Less is supplied and demanded at the lower equilibrium price. Output decreases at any given price.
These explanations assume ceteris paribus, that the relationship between real disposable income and quantity demanded/supplied is directly proportional. The models are also generalised and do not account for inferior goods for which demand is inelastic.
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