<P> In economics, a model is a theoretical construct representing economic processes by a set of variables and a set of logical and / or quantitative relationships between them . The economic model is a simplified, often mathematical, framework designed to illustrate complex processes . Frequently, economic models posit structural parameters . A model may have various exogenous variables, and those variables may change to create various responses by economic variables . Methodological uses of models include investigation, theorizing, and fitting theories to the world . </P> <P> In general terms, economic models have two functions: first as a simplification of and abstraction from observed data, and second as a means of selection of data based on a paradigm of econometric study . </P>

How economists use models to study the real world
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