Problem 3 Consider the role of economic models in explaining phenomena in the real world. a. Which of the following statements are correct? In economics, a model is a simplified representation (diagrammatical or physical) that helps us to understand what is going on by focusing attention on what is important. Ceteris paribus is an assumption used in economic models in which the important variables that you are focusing on are kept constant. An equilibrium is a self-perpetuating situation that does not change, even when a force for change is introduced from the outside that alters the basic data describing the situation. b. Figure 2.20 plots real wages against population in England from the 12805 to the 18605: iv. Malthusian traps ,. "-1560. . N405 ' on U1 l. U! U1 s Real wage index (1860 = 100) \"-4 O 1340; 1' 1290: '13th to 16th century 40 'llllI 0 5 10 15 Population {millions} According to Malthus, with diminishing average product of labor in production and population growth in response to increases in real wages. an increase in productivity will result in a larger population but not higher real wages in the long run. Based on the inlormation above, which of the following statements is correct? i. Between the 18005 and the 18605, population grows as real wages rise. This is entirely in line with Malthus's description of the economy's growth. ii. The Malthusian model does not take into account the possibility of a persistent positive technology shock that may offset the diminishing average product of labor. a fixed size and the only changes to living standards are caused by changes in population more people means less resources to go around. In the space given on your Ouiz Written Answer Sheet. write a letter to the editor of your local paper describing your response to this Malthusian view of the world using at least one concept introduced in the units we've studied so far in the textbook. Do you agree or disagree with the politician's view? Why? Imagine a politician who opposes immigration because they believe the economy is a pie of