Simple economic model and modelling approaches

Question 1

What are economic models?

Answer 1

Formal presentation of some aspect of economic theory using the language of mathematics

Question 2

What does mathematical programme do?

Answer 2

Optimises (minimises or maximises) an objective function subject to a set of constraints

Question 3

What is a non-linear model?

Answer 3

That there isnt linearity either in the objective function or in constraints

Question 4

What is a linear model?

Answer 4

That both the objective function and constraints are linear

Question 5

How is often used linear models?

Answer 5

To find least-cost solutions to problems subject to a large number of technical or resource constraints

Question 6

What does abatement means?

Answer 6

Reduction of pollution

Question 7

What is a binding constraint and its relationship with shadow price?

Answer 7

It’s a constraint that has no impact in the optimal solution, therefore the shadow price will be 0