General equilibrium theory is a fundamental concept in economics that seeks to explain how supply and demand in multiple markets interact simultaneously to determine prices and allocation of resources in an economy. Unlike partial equilibrium analysis, which examines a single market in isolation, general equilibrium considers the interdependencies among various markets. Key components of general equilibrium theory include: 1. **Multiple Markets**: General equilibrium takes into account various goods and services, as well as the factors of production (labor, capital, land, etc.
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.
General equilibrium theory is a branch of economics that studies how supply and demand in multiple markets interact simultaneously and how they achieve an overall equilibrium in an economy. General equilibrium theorists analyze how changes in one part of the economy can affect the entire system, taking into account the interdependencies among different markets.
The term "abstract economy" is not commonly defined within economic literature, so its interpretation can vary. However, it generally refers to the theoretical or conceptual framework for understanding economic processes and relationships without being confined to specific real-world applications. 1. **Theoretical Constructs**: Abstract economy often involves the use of models, theories, and mathematical frameworks to represent and analyze economic phenomena.
Applied general equilibrium (AGE) refers to a branch of economic analysis that utilizes general equilibrium models to assess the effects of economic policies, external shocks, or changes in market conditions across multiple sectors of the economy. These models capture the interdependencies between different markets and agents, allowing for a comprehensive analysis of how various components of an economy interact with one another.
The Arrow–Debreu model is a foundational concept in modern microeconomic theory, named after economists Kenneth Arrow and Gérard Debreu, who developed it in the 1950s. The model provides a formal framework for understanding general equilibrium in a competitive market and demonstrates the conditions under which an economy can achieve Pareto efficiency.
Computable General Equilibrium (CGE) refers to a class of economic models that are used to analyze the economy as a whole and the interactions between various sectors, agents, and markets. These models are particularly useful for assessing the impacts of policy changes, economic shocks, or other external factors on an economy.
Dynamic Stochastic General Equilibrium (DSGE) is a macroeconomic modeling approach that combines elements of dynamic optimization, stochastic processes, and general equilibrium theory to analyze the behavior of an economy over time under uncertainty. DSGE models are widely used by economists for policy analysis, forecasting, and understanding the impact of economic shocks.
A Fisher market is a concept from economics, particularly in the field of market design and game theory, named after the economist, John Fisher. It typically refers to a model in which goods are allocated among several agents (consumers) based on their preferences and budget constraints. The Fisher market model provides a way to understand how prices can adjust in response to demand and supply to achieve an efficient allocation of resources.
General disequilibrium refers to a situation in an economic model where supply and demand across multiple markets are not in balance simultaneously. This is in contrast to general equilibrium, where all markets clear (i.e., supply equals demand) at the same time, leading to a stable state for the entire economy. In a state of general disequilibrium, certain markets might experience excess supply (surpluses) while others may face excess demand (shortages).
Hahn's problem is a question in mathematics, specifically in the area of number theory related to the behavior of integers along with some algebraic structures. It is closely associated with the study of *integral linear combinations* of certain sets and, more abstractly, touches on concepts from algebraic number theory and diophantine approximation. The problem is named after the mathematician Hans Hahn, who posed the original question concerning the nature of certain sequences of integers.
The IS-LM model is an economic framework that illustrates the interaction between the goods market and the money market in an economy. The model was developed by John Hicks and Alvin Hansen in the 1930s and is based on the work of John Maynard Keynes. ### Key Components of the IS-LM Model: 1. **IS Curve**: - The IS curve stands for "Investment-Savings.
The Kakutani Fixed-Point Theorem is an important result in the field of mathematical analysis and game theory, particularly in the study of convex sets and continuous functions. It generalizes the Brouwer Fixed-Point Theorem, which is applicable in Euclidean spaces, to more complex scenarios involving multi-valued functions.
Local nonsatiation is an economic concept that refers to a preference structure where, at any given consumption level, an individual can find a consumption bundle that they prefer more than their current one, no matter how much of a good they already have. This means that for any combination of goods, there exists nearby alternatives that yield higher satisfaction or utility. In simpler terms, local nonsatiation implies that consumers are never completely satisfied with what they have and can always find something better if they look closely.
Numéraire is a term used in economics, finance, and mathematics to refer to a unit of account or a standard numerical value that is used to measure the value of goods, services, or financial assets. In a broader sense, it acts as a common denominator that facilitates comparisons of value across different items. In the context of finance, numéraire can refer to a specific reference asset or currency used to express the value of other assets.
Partial equilibrium is an economic analysis tool used to examine the equilibrium conditions in a specific market in isolation from other markets. It focuses on the supply and demand dynamics within that particular market, assuming that other markets remain constant or unaffected by changes in this market. In a partial equilibrium framework, key elements include: 1. **Supply and Demand Curves**: The model uses supply and demand curves to determine the equilibrium price and quantity for a good or service.
Perfect competition is a theoretical market structure characterized by a set of specific conditions that foster an idealized form of competition among firms. In a perfectly competitive market, the following key assumptions typically hold true: 1. **Many Buyers and Sellers**: There are a large number of buyers and sellers in the market, none of whom has significant market power to influence prices. Each firm is a price taker.
Quantity adjustment refers to the process of modifying the quantity of goods or services to align with demand, inventory levels, production capabilities, pricing strategies, or contractual obligations. This adjustment can be applied in various contexts, including: 1. **Inventory Management**: Businesses may adjust the quantity of stock on hand to meet changing customer demands, avoid overstock situations, and minimize holding costs.
Radner equilibrium is a concept in economic theory that extends the idea of general equilibrium in markets to an environment where agents have incomplete information and trading occurs over time. It is particularly relevant in the context of dynamic models of asset pricing and markets where agents face uncertainty regarding the state of the world. The concept is named after economist Roy Radner, who developed the framework in the 1970s.
The term "regular economy" is not commonly used in economic literature, and its meaning can vary based on context. However, it may refer to a stable and conventional form of economic activity characterized by consistent patterns of production, distribution, and consumption of goods and services.
The Temporary Equilibrium Method is a concept used primarily in economics to analyze situations where an economy or market does not reach a long-term equilibrium. Instead, it examines the equilibrium conditions in a short-term frame, where certain factors are held constant or assumed to be fixed in the analysis. ### Key Features of the Temporary Equilibrium Method: 1. **Short-term Focus**: The method looks at the market dynamics over a brief period, rather than a long-term perspective.
Walras's law is an economic theory that states that in a general equilibrium model, the sum of the values of excess demands across all markets must equal zero. In simpler terms, it asserts that if there is excess supply in one market, there must be excess demand in another market, such that the overall market isn't deficient.
A Walrasian auction is a theoretical concept in economics that stems from the work of Léon Walras, a French economist known for his contributions to general equilibrium theory. The Walrasian auction is not an auction in the traditional sense but rather a method used to achieve market equilibrium where supply equals demand. In a Walrasian auction, a hypothetical auctioneer plays a crucial role in the market. The auctioneer announces prices for goods and allows buyers and sellers to respond to these prices.
The Wicksellian differential refers to the difference between the natural rate of interest and the actual market interest rate. It is named after the Swedish economist Knut Wicksell, who discussed the concept in the context of his monetary theory in the early 20th century. According to Wicksell, the natural rate of interest is the rate that would equilibrate savings and investment in an economy, without causing inflation or deflation.
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