The Neo-Classical Model and Some Extensions
In Chapter 1 a theoretically ‘ideal’ model of household behaviour was outlined. However, in empirical work, such a complicated model cannot be used. A lack of sufficiently detailed data and computational limitations would make it impossible to analyse the different aspects of behaviour simultaneously. In addition, to do this is not always desirable either. We use a model as an abstract representation of reality which focuses on a particular question we are interested in and neglects other aspects.
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