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General equilibrium theory is a central point of contention and influence between the neoclassical school and other schools of economic thought, and different schools have varied views on general equilibrium theory. Some, such as the Keynesian and Post-Keynesian schools, strongly reject general equilibrium theory as "misleading" and "useless".
where the economic meanings of and are the equilibrium prices of various goods and the equilibrium activity levels of various economic agents, respectively. We can further extend the von Neumann general equilibrium model to the following structural equilibrium model with A {\displaystyle \mathbf {A} } and B {\displaystyle \mathbf {B} } as ...
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.
Walras's law is a principle in general equilibrium theory asserting that budget constraints imply that the values of excess demand (or, conversely, excess market supplies) must sum to zero regardless of whether the prices are general equilibrium prices.
He formulated the marginal theory of value (independently of William Stanley Jevons and Carl Menger) and pioneered the development of general equilibrium theory. [4] Walras is best known for his book Éléments d'économie politique pure , a work that has contributed greatly to the mathematization of economics through the concept of general ...
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.
Dynamic stochastic general equilibrium modeling (abbreviated as DSGE, or DGE, or sometimes SDGE) is a macroeconomic method which is often employed by monetary and fiscal authorities for policy analysis, explaining historical time-series data, as well as future forecasting purposes. [1]
See Financial economics § Arbitrage-free pricing and equilibrium. Relatedly, both approaches are consistent [ 9 ] [ 2 ] with what is called the Arrow–Debreu theory . Here models can be derived as a function of " state prices " - contracts that pay one unit of a numeraire (a currency or a commodity) if a particular state occurs at a ...