Question

Patricia Cruz is a Mexican economist. She analyzes the demand-supply-market of Latin Americans notebook's market. She notes some assumptions and then concludes the market. Explain why she makes the assumptions!

Answer 1

She makes the assumptions in order to simplify the economic process of analyzing the demand and supply market of notebook's. It makes the conclusion much more attainable otherwise there will be several factors which would impact the basis of conclusion and not make the analysis worth it.

Making assumptions leads to gaining a better understanding about the demand and supply market of Latin Americans, as one is easily able to determine why the demand increased/decreased the way it did by controlling all other factors which are not coherent to the market and which create short term fluctuations.

Assumptions thus help to isolate the effects of a change which occur in one variable so that one is better able to gain a conclusion in the market. It makes the demand and supply market easier to understand and she might use different assumptions in order to get a different answer every time by seeing how one variable impacted the analysis and to what extent.

For example by creating an assumption that the notebook market is dependent on only the supply of trees and not on any other factor. It helps to determine how the market was affected because of the reduction in supply of trees so that one is able to identify the major contributing factor and base their further studies on that conclusion.