In this article we are going to learn about – what is aggregate demand, what are its components, then we will see the standard formula used to calculate aggregate demand. What is Aggregate Demand? It is a term that is used in macroeconomics, which is used to measure the sumRead More →
Economics behind real estate market Real estate denotes a significant portion of most people’s wealth. It is especially true in a country like India where investing in real estate property is the first advice given to anyone who starts off with a stable career. According to the most recent Survey ofRead More →
Definition A production possibility Frontier is a curve showing all maximum output possibilities for two goods. It also gives an answer to our question – “what is our maximum production capacity?”. Understanding PPF with an example When we say maximum production, I will give an example what I mean. Let’sRead More →
What is OLG model? An overlapping generations model, abbreviated to OLG model, is a type of economic model in which agents live a finite length of time long enough to overlap with at least one period of another agent’s life. As it models explicitly the different periods of life, suchRead More →
There are situations and circumstances where the market is not Pareto optimal or Pareto efficient. These situations are called market failure. An economist’s suggestion during these situations is government intervention which is necessary through better policy decisions. Some of the major causes of market failure are:- 1. Imperfect Markets:- Pareto efficiencyRead More →
Economic growth takes place at uneven rates across different sectors of the economy. Hence economists use models to understand different aspects of the economy. Multi-sector growth model is a growth model where more than two sector in the economy is considered, which produces several durable goods each produced in aRead More →
Joseph Alois Schumpeter (1888-1952) is an important economist in the history of economic thought. His methods of analysis and ideas about what causes development in a capitalist economy were different from classical economists. His theory emphasizes the evolutionary process of the capitalist economy. Capitalist economy is an economy in whichRead More →
Definition Ramsey model is an extension of the Solow model in terms of bringing optimization into the growth process. It is one of the basic workhorse models in macroeconomics. The basic point about Ramsey model is that, it is a prescriptive theory and not a predictive. Basically, this kind of modelRead More →
What is Real Business Cycle (RBC) theory RBC theory belongs to the new classical macroeconomics models in which business-cycle fluctuates to a large extent and can be accounted for by real (in contrast to nominal) shocks. Unlike other leading theories of the business cycle, RBC theory sees business cycle fluctuations as the efficient response toRead More →
What is ‘Game Theory’ It is the study of human conflict and cooperation within a competitive situation. In some respects, game theory is the science of strategy, or at least the optimal decision-making of independent and competing actors in a strategic setting. The key pioneers of game theory were mathematiciansRead More →