Question

When analyzing a market, how do economists deal

with the problem that many factors that affect the market

are changing at the same time?

Short answer

Economist consider only one or two factors at a time.

Step-by-step solution

Step 1.

Economists deal with the problem that many factors that affect the market are changing at the same time by taking only one factor, the rest factors remain constant.

Taking only one factor does not apply to real-life scenarios but it helps for a better understanding of the problem & simplifies the Economic model.

Step 2.For example:

In comparative advantage theory,

the assumptions are-

• There are only two countries.
• only factor of production is labor.
• In reality, these assumptions are unrealistic because one country does trade with many countries with varieties of goods but theory introduces us to opportunity cost which helps in choosing between different options for production.