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An economic 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. [1]
The Ricardian model of comparative advantage has trade ultimately motivated by differences in labour productivity using different "technologies". Heckscher and Ohlin did not require production technology to vary between countries, so (in the interests of simplicity) the "H–O model has identical production technology everywhere".
The sharing economy is a socio-economic system whereby consumers share in the creation, production, distribution, trade and consumption of goods, and services. These systems take a variety of forms, often leveraging information technology and the Internet, particularly digital platforms, to facilitate the distribution, sharing and reuse of excess capacity in goods and services.
A macroeconomic model is an analytical tool designed to describe the operation of the problems of economy of a country or a region. These models are usually designed to examine the comparative statics and dynamics of aggregate quantities such as the total amount of goods and services produced, total income earned, the level of employment of productive resources, and the level of prices.
The O-ring theory of economic development is a model of economic development put forward by Michael Kremer in 1993, [1] which proposes that tasks of production must be executed proficiently together in order for any of them to be of high value. The key feature of this model is positive assortative matching, whereby people with similar skill ...
The model also reveals that relocating or including an agent or subsystem in an organization can affect its dynamics by altering the attraction basins governing it. This may lead to undesired qualitative leaps or even rupture of the organization's self-referential network, potentially resulting in the collapse of one of its subsystems.
The Dual Sector model, or the Lewis model, is a model in developmental economics that explains the growth of a developing economy in terms of a labour transition between two sectors, the subsistence or traditional agricultural sector and the capitalist or modern industrial sector.
The Smets-Wouters model is one example of the importance of microfoundations as it is regarded as a benchmark model for analysing monetary and fiscal policy. [12] The model offers three main advantages of microfoundations: Microfoundations provides a modelling structure where data may not be very informative.