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EconModel Description |
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Sixteen of the most important models in economics are included in this collection of EconModel applications. Learn about the principles of microeconomics and the historical progression of macroeconomic models.
Fundamentals
Basic Supply and Demand is the most important model in economics. It shows how free markets are able to allocate resources without instructions from a central authority.
Two Goods - Two Prices explains the origin of the demand curve for a good. This analysis is the foundation for the Theory of the Consumer.
Perfect Competition and Monopoly and Monopolistic Competition explore the foundation for the supply curve for a good. These models are the central elements of the Theory of the Firm.
Advanced Supply and Demand
Who Pays a Sales Tax? is an interesting application of basic supply and demand principles. It emphasizes thinking like an economist and directs attention to the importance of considering the slopes of the supply and demand curves.
The Cobweb Model and Inventory-Based Pricing examines the basis for asserting that the equilibrium with supply equal to demand is stable.
Industrial Organization
Price Discrimination, which is presented in terms of Why Give Students an Educational Discount?, analyzes the nature of a market where firms maximize profits by offering different prices to different customers.
Labor Economics
The supply and demand for labor reverse the roles of utility maximizing behavior and profit maximizing behavior so that utility maximization explains the supply function and profit maximization explains the demand function.
The Demand for Labor arises from properties of the production function seen earlier in the explanation of the supply curve for goods.
Labor Supply, Income Taxes, and Transfer Payments introduces a labor-leisure tradeoff in a variation on the Two Goods - Two Prices Model that is central to the Theory of the Consumer.
Macro Foundations
Intertemporal Substitution applies the Two Goods - Two Prices Model to consumption in the present and consumption in the future. This provides a framework for discussing interest rates. Incorporating production possibility frontiers extends the analysis to include the decision to invest in education and the decision to save for retirement. |
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