Comparative statics is an analytical tool used in economics to compare the equilibrium states of a system before and after a change in an exogenous variable. It helps economists to understand how changes in external factors (such as policy changes, technological advancements, or changes in consumer preferences) impact economic agents' behaviors and outcomes in a given model. The process typically involves the following steps: 1. **Initial Equilibrium**: Establishing the initial equilibrium state of the model based on certain parameters and variables.
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