Model

By:

James Knight

James is a lead editor for Invezz, where he covers topics from across the financial world, from the stock… read more.

Updated: Aug 20, 2021

Ad disclosure

Invezz is an independent platform with the goal of helping users achieve financial freedom. In order to fund our work, we partner with advertisers who compensate us for users that Invezz refers to their services. While our reviews and assessments of each product on the site are independent and unbiased, brands may pay to appear higher up our table rankings or place ads in specific areas of the site. The order in which products and services appear on Invezz does not represent an endorsement from us, and please be aware that there may be other platforms available to you than the products and services that appear on our website. Read more about how we make money >

A theoretical system of relationships which tries to capture the essential elements of a situation in the real world. Any real-world problem will, in general, consist of a large number of variables with a large number of often complex relationships between them. If any headway is to be made in the analysis of such situations, it is necessary to try to isolate the most important elements and to disregard the rest. Although this may mean that a mode! is ‘unrealistic’ in the sense that it does not completely describe the actual situation, it may still give us far more insight into a problem, and far greater predictive ability, than would a less abstract approach which tried to take everything into account.

Reference: The Penguin Dictionary of Economics, 3rd edt.