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The structural equilibrium model is a matrix-form computable general equilibrium model in new structural economics. [30] [31] This model is an extension of the John von Neumann's general equilibrium model (see Computable general equilibrium for details). Its computation can be performed using the R package GE.
Computable general equilibrium (CGE) models are a class of economic models that use actual economic data to estimate how an economy might react to changes in policy, technology or other external factors. CGE models are also referred to as AGE (applied general equilibrium) models. A CGE model consists of equations describing model variables and ...
Robert Solow interprets the theorem as showing that, for modelling macroeconomic growth, the dynamic stochastic general equilibrium is no more microfounded than simpler models such as the Solow–Swan model. As long as a macroeconomic growth model assumes an excess demand function satisfying continuity, homogeneity, and Walras's law, it can be ...
Stochastic: The models take into consideration the transmission of random shocks into the economy and the consequent economic fluctuations. General: referring to the entire economy as a whole (within the model) in that price levels and output levels are determined jointly. This is opposed to a partial equilibrium, where price levels are taken ...
Walras's law is a consequence of finite budgets. If a consumer spends more on good A then they must spend and therefore demand less of good B, reducing B's price. The sum of the values of excess demands across all markets must equal zero, whether or not the economy is in a general equilibrium.
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.
In mathematical economics, the Arrow–Debreu model is a theoretical general equilibrium model. It posits that under certain economic assumptions ( convex preferences , perfect competition , and demand independence), there must be a set of prices such that aggregate supplies will equal aggregate demands for every commodity in the economy.
The classical general equilibrium model aims to describe the economy by aggregating the behavior of individuals and firms. [1] Note that the classical general equilibrium model is unrelated to classical economics , and was instead developed within neoclassical economics beginning in the late 19th century.