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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]
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.
According to Kaldor, “The purpose of a theory of economic growth is to show the nature of non-economic variables which ultimately determine the rate at which the general level of production of the economy is growing, and thereby contribute to an understanding of the question of why some societies grow so much faster than others.” [2] [1]
The mainstream economic models of the 20th century, defined here as those taught the most in Economics introductory courses around the world, are neoclassical. The Circular Flow published by Paul Samuelson in 1944 and the supply and demand curves published by William S. Jevons in 1862 are canonical examples of neoclassical economic models ...
Most economic models rest on a number of assumptions that are not entirely realistic. For example, agents are often assumed to have perfect information, and markets are often assumed to clear without friction. Or, the model may omit issues that are important to the question being considered, such as externalities. Any analysis of the results of ...
For example, in public finance the Robinson Crusoe economy is used to study the various types of public goods and certain aspects of collective benefits. [2] It is used in growth economics to develop growth models for underdeveloped or developing countries to embark upon a steady growth path using techniques of savings and investment.
An Essay on Economic Theory. Auburn, Alabama: Ludwig von Mises Institute. ISBN 0-415-07577-7. Daraban, Bogdan. "Introducing the Circular Flow Diagram to Business Students." Journal of Education for Business 85.5 (2010): 274–279. Mankiw, Gregory (2011). Principles of Economics, 6th edition. Thomson Europe. Marks, Melanie, and Gemma Kotula.
Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist is a 2017 non-fiction book by Oxford economist Kate Raworth. [1] The book elaborates on her concept of doughnut economics , first developed in her 2012 paper, A Safe and Just Space for Humanity .