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POLICONOMICS
Welfare economics I. Welfare economics analyses different states in which markets or the economy can be. Its main objective is to find an indicator or measure in order to guarantee that markets are behaving optimally, thus also guaranteeing that consumer welfare is as high as possible. Even though welfare was already analysed by economists suchIS-LM-BP MODEL
The IS-LM-BP model (also known as IS-LM-BoP or Mundell-Fleming model) is an extension of the IS-LM model, which was formulated by the economists Robert Mundell and Marcus Fleming, who made almost simultaneously an analysis of open economies in the 60s.Basically we could say that the Mundell-Fleming model is a version of the IS-LM model for an open economy. ECONOMIES OF LEARNING Economies of learning derive from the know-howpicked up through experience. The main difference between this and economies of scale or economies of scope is the fact that it is not correlated to production levels in the same way: it does not depend on producing more quantity or a wider portfolio, but from becoming a true specialist in a certain field, by producing a greater cumulative amount EXPECTATIONS-AUGMENTED PHILLIPS CURVE The expectations-augmented Phillips curve introduces adaptive expectations into the Phillips curve.These adaptive expectations, which date from Irving Fisher ’s book “The Purchasing Power of Money”, 1911, were introduced into the Phillips curve by monetarists, specially Milton Friedman.Therefore, we could say that the expectations-augmented Phillips curve was first used toELLSBERG PARADOX
Ellsberg paradox. The Ellsberg’s paradox was developed by Daniel Ellsberg in his paper “Risk, Ambiguity, and the Savage Axioms”, 1961. It concerns subjective probability theory, which fails to follow the expected utility theory, and confirms Keynes ’ 1921 previous formulation. This paradox is usually explained with the nextexperiment
PERFECT COMPETITION I: SUPPLY AND DEMAND The demand and supply curves define the market clearing, that is, where the demand of the products meets its supply. At this point we have what is known as, an equilibrium point, with its corresponding price and quantity of equilibrium. It is possible for disequilibrium to occur when the amount demanded does not equal the amount supplied. INFLATION & UNEMPLOYMENT I: ECONOMIC POLICIES Inflation & Unemployment I: Economic policies. Summary. Inflation and unemployment are probably two of the most used economic indicators of how well a country is doing. Both are to be carefully measured, in order for governments to be able to keep them under control. In this LP we learn about what these two concepts are, and how to tackle them. MARSHALLIAN AND HICKSIAN DEMANDS Marshallian and Hicksian demands stem from two ways of looking at the same problem- how to obtain the utility we crave with the budget we have. Consumption duality expresses this problem as two sides of the same coin: keeping our budget fixed and maximising utility (primal demand, which leads us to Marshallian demand curves) or setting a target level of utility and minimising the cost MONETARISM: NATURAL RATE OF UNEMPLOYMENT The term natural rate of unemployment was introduced by Milton Friedman in 1968, in his article “The Role of Monetary Policy”, following his presidential address delivered at the annual meeting of the American Economic Association, in 1967. It is based in Knut Wicksell’ concept of “natural” rate, which defines how there will be no permanent changes in the considered variable below or RICARDIAN DISTRIBUTION THEORY Ricardian distribution theory. The importance of David Ricardo ‘s model is that it was one of the first models used in Economics, aimed at explaining how income is distributed in society. Starting assumptions: -there is only one industry, agriculture; only one good, grain; -there are three kinds of people:POLICONOMICS
Welfare economics I. Welfare economics analyses different states in which markets or the economy can be. Its main objective is to find an indicator or measure in order to guarantee that markets are behaving optimally, thus also guaranteeing that consumer welfare is as high as possible. Even though welfare was already analysed by economists suchIS-LM-BP MODEL
The IS-LM-BP model (also known as IS-LM-BoP or Mundell-Fleming model) is an extension of the IS-LM model, which was formulated by the economists Robert Mundell and Marcus Fleming, who made almost simultaneously an analysis of open economies in the 60s.Basically we could say that the Mundell-Fleming model is a version of the IS-LM model for an open economy. ECONOMIES OF LEARNING Economies of learning derive from the know-howpicked up through experience. The main difference between this and economies of scale or economies of scope is the fact that it is not correlated to production levels in the same way: it does not depend on producing more quantity or a wider portfolio, but from becoming a true specialist in a certain field, by producing a greater cumulative amount EXPECTATIONS-AUGMENTED PHILLIPS CURVE The expectations-augmented Phillips curve introduces adaptive expectations into the Phillips curve.These adaptive expectations, which date from Irving Fisher ’s book “The Purchasing Power of Money”, 1911, were introduced into the Phillips curve by monetarists, specially Milton Friedman.Therefore, we could say that the expectations-augmented Phillips curve was first used toELLSBERG PARADOX
Ellsberg paradox. The Ellsberg’s paradox was developed by Daniel Ellsberg in his paper “Risk, Ambiguity, and the Savage Axioms”, 1961. It concerns subjective probability theory, which fails to follow the expected utility theory, and confirms Keynes ’ 1921 previous formulation. This paradox is usually explained with the nextexperiment
PERFECT COMPETITION I: SUPPLY AND DEMAND The demand and supply curves define the market clearing, that is, where the demand of the products meets its supply. At this point we have what is known as, an equilibrium point, with its corresponding price and quantity of equilibrium. It is possible for disequilibrium to occur when the amount demanded does not equal the amount supplied. INFLATION & UNEMPLOYMENT I: ECONOMIC POLICIES Inflation & Unemployment I: Economic policies. Summary. Inflation and unemployment are probably two of the most used economic indicators of how well a country is doing. Both are to be carefully measured, in order for governments to be able to keep them under control. In this LP we learn about what these two concepts are, and how to tackle them. MARSHALLIAN AND HICKSIAN DEMANDS Marshallian and Hicksian demands stem from two ways of looking at the same problem- how to obtain the utility we crave with the budget we have. Consumption duality expresses this problem as two sides of the same coin: keeping our budget fixed and maximising utility (primal demand, which leads us to Marshallian demand curves) or setting a target level of utility and minimising the cost MONETARISM: NATURAL RATE OF UNEMPLOYMENT The term natural rate of unemployment was introduced by Milton Friedman in 1968, in his article “The Role of Monetary Policy”, following his presidential address delivered at the annual meeting of the American Economic Association, in 1967. It is based in Knut Wicksell’ concept of “natural” rate, which defines how there will be no permanent changes in the considered variable below or RICARDIAN DISTRIBUTION THEORY Ricardian distribution theory. The importance of David Ricardo ‘s model is that it was one of the first models used in Economics, aimed at explaining how income is distributed in society. Starting assumptions: -there is only one industry, agriculture; only one good, grain; -there are three kinds of people:LOANABLE FUNDS
Loanable funds. Net capital outflows (NCOs, also called net foreign investment) make reference to the difference between the acquisition of foreign assets by domestic residents and the acquisition of domestic assets by non-residents. Therefore, it has to do with savings and investment (loanable funds) and foreign currency exchange. MARSHALLIAN AND HICKSIAN DEMANDS Marshallian and Hicksian demands stem from two ways of looking at the same problem- how to obtain the utility we crave with the budget we have. Consumption duality expresses this problem as two sides of the same coin: keeping our budget fixed and maximising utility (primal demand, which leads us to Marshallian demand curves) or setting a target level of utility and minimising the cost MONOPOLY I: LERNER INDEX The Lerner index measures a firm’s level of market power by relating price to marginal cost.When either exact prices or information on the cost structure of the firm are hard to get, the Lerner index uses price elasticity of demand in order to measure market power: the Lerner index is equivalent to the inverse of the elasticity in its absolute value faced by the firm when price is set to PRODUCTION IN THE SHORT RUN The short run is considered the period of time where fixed costs are still fixed, which basically means that, if you have a factory, you have to make do with it because you can neither sell it, nor make it bigger, nor rent half of it: you are stuck with it for the time being. Capital is also considered fixed, meaning that, in the short run, all you can play around with are your variable costs PERFECT COMPETITION I: SHORT RUN SUPPLY CURVE Perfect competition I: Short run supply curve. Summary. Even though perfect competition is hard to come by, it’s a good starting point to understand market structures. A deep understanding of how competitive markets work and are formed is the cornerstone to understand why it’s so hard to reach them. In this first LearningPath on perfect
A.10 MARSHALLIAN AND HICKSIAN DEMAND CURVES Marshallian and Hicksian demand curves meet where the quantity demanded is equal for both sides of the consumer choice problem (maximising utility or minimising cost). Marshallian demand makes more sense when we look at goods or services that make up a large part of our expenses. Here, the income effect is very large. HOTELLING'S LINEAR CITY Hotelling’s linear city model was developed by Harold Hotelling in his article “Stability in Competition”, in 1929. In this model he introduced the notions of locational equilibrium in a duopoly in which two firms have to choose their location taking into consideration consumers’ distribution and transportation costs. Hotelling’s model has been source of inspiration for a great OLIGOPOLY II: EXIT BARRIERS Exit barriers (or barriers to exit) are obstacles that stop or prevent the exit of a firm from a specific market. It is associated with firms that are incurring in some form of losses, but cannot exit the market as a result of exit barriers that would further increase their level of loss. In Michael Porter’s model of competitive analysisSTACKELBERG DUOPOLY
Stackelberg duopoly, also called Stackelberg competition, is a model of imperfect competition based on a non-cooperative game. It was developed in 1934 by Heinrich Stackelberg in his “Market Structure and Equilibrium” and represented a breaking point in the study of market structure, particularly the analysis of duopolies since it was a model based on different starting assumptions and NEW KEYNESIAN ECONOMICS: GEORGE AKERLOF New Keynesian Economics would keep on exploring market failure one breakdown at a time. George Arthur Akerlof, born in 1940, is an American economist and professor at University of California, Berkeley. He was awarded the Nobel Prize in Economic Sciences in 2001POLICONOMICS
Welfare economics I. Welfare economics analyses different states in which markets or the economy can be. Its main objective is to find an indicator or measure in order to guarantee that markets are behaving optimally, thus also guaranteeing that consumer welfare is as high as possible. Even though welfare was already analysed by economists suchIS-LM-BP MODEL
The IS-LM-BP model (also known as IS-LM-BoP or Mundell-Fleming model) is an extension of the IS-LM model, which was formulated by the economists Robert Mundell and Marcus Fleming, who made almost simultaneously an analysis of open economies in the 60s.Basically we could say that the Mundell-Fleming model is a version of the IS-LM model for an open economy. EXPECTATIONS-AUGMENTED PHILLIPS CURVE The expectations-augmented Phillips curve introduces adaptive expectations into the Phillips curve.These adaptive expectations, which date from Irving Fisher ’s book “The Purchasing Power of Money”, 1911, were introduced into the Phillips curve by monetarists, specially Milton Friedman.Therefore, we could say that the expectations-augmented Phillips curve was first used toCAMBRIDGE SCHOOL
Cambridge school | Policonomics. Mar 22. Lope Gallego. -. Cambridge school. Name given to British economist Alfred Marshall and his followers, who were also part of the neoclassical school of economics, such as Arthur C. Pigou and Francis Y. Edgeworth, which fully assimilated the concepts and methods of marginalism. They are alsoconsidered to
ELLSBERG PARADOX
Ellsberg paradox. The Ellsberg’s paradox was developed by Daniel Ellsberg in his paper “Risk, Ambiguity, and the Savage Axioms”, 1961. It concerns subjective probability theory, which fails to follow the expected utility theory, and confirms Keynes ’ 1921 previous formulation. This paradox is usually explained with the nextexperiment
EXCHANGE RATE REGIMES: DEFINITION An exchange rate regime is the system that a country’s monetary authority, -generally the central bank-, adopts to establish the exchange rate of its own currency against other currencies. Each country is free to adopt the exchange-rate regime that it considers optimal, and will do so using mostly monetary and sometimes even fiscal policies.. The distinction amongst these exchange rates MONETARISM: NATURAL RATE OF UNEMPLOYMENT The term natural rate of unemployment was introduced by Milton Friedman in 1968, in his article “The Role of Monetary Policy”, following his presidential address delivered at the annual meeting of the American Economic Association, in 1967. It is based in Knut Wicksell’ concept of “natural” rate, which defines how there will be no permanent changes in the considered variable below or MARSHALLIAN AND HICKSIAN DEMANDS Marshallian and Hicksian demands stem from two ways of looking at the same problem- how to obtain the utility we crave with the budget we have. Consumption duality expresses this problem as two sides of the same coin: keeping our budget fixed and maximising utility (primal demand, which leads us to Marshallian demand curves) or setting a target level of utility and minimising the cost NEW KEYNESIAN ECONOMICS: GEORGE AKERLOF New Keynesian Economics would keep on exploring market failure one breakdown at a time. George Arthur Akerlof, born in 1940, is an American economist and professor at University of California, Berkeley. He was awarded the Nobel Prize in Economic Sciences in 2001 WELFARE ECONOMICS II: KALDOR'S CRITERION he Kaldor criterion is a compensation criterion developed by Nicholas Kaldor in his paper “Welfare Propositions of Economics and Interpersonal Comparisons of Utility”, 1939. This criterion is satisfied if state Y is preferred to state X and there is such a compensation and reassignment that Y turns to Yˈ that is at least as good as X in a Pareto sense.POLICONOMICS
Welfare economics I. Welfare economics analyses different states in which markets or the economy can be. Its main objective is to find an indicator or measure in order to guarantee that markets are behaving optimally, thus also guaranteeing that consumer welfare is as high as possible. Even though welfare was already analysed by economists suchIS-LM-BP MODEL
The IS-LM-BP model (also known as IS-LM-BoP or Mundell-Fleming model) is an extension of the IS-LM model, which was formulated by the economists Robert Mundell and Marcus Fleming, who made almost simultaneously an analysis of open economies in the 60s.Basically we could say that the Mundell-Fleming model is a version of the IS-LM model for an open economy. EXPECTATIONS-AUGMENTED PHILLIPS CURVE The expectations-augmented Phillips curve introduces adaptive expectations into the Phillips curve.These adaptive expectations, which date from Irving Fisher ’s book “The Purchasing Power of Money”, 1911, were introduced into the Phillips curve by monetarists, specially Milton Friedman.Therefore, we could say that the expectations-augmented Phillips curve was first used toCAMBRIDGE SCHOOL
Cambridge school | Policonomics. Mar 22. Lope Gallego. -. Cambridge school. Name given to British economist Alfred Marshall and his followers, who were also part of the neoclassical school of economics, such as Arthur C. Pigou and Francis Y. Edgeworth, which fully assimilated the concepts and methods of marginalism. They are alsoconsidered to
ELLSBERG PARADOX
Ellsberg paradox. The Ellsberg’s paradox was developed by Daniel Ellsberg in his paper “Risk, Ambiguity, and the Savage Axioms”, 1961. It concerns subjective probability theory, which fails to follow the expected utility theory, and confirms Keynes ’ 1921 previous formulation. This paradox is usually explained with the nextexperiment
EXCHANGE RATE REGIMES: DEFINITION An exchange rate regime is the system that a country’s monetary authority, -generally the central bank-, adopts to establish the exchange rate of its own currency against other currencies. Each country is free to adopt the exchange-rate regime that it considers optimal, and will do so using mostly monetary and sometimes even fiscal policies.. The distinction amongst these exchange rates MONETARISM: NATURAL RATE OF UNEMPLOYMENT The term natural rate of unemployment was introduced by Milton Friedman in 1968, in his article “The Role of Monetary Policy”, following his presidential address delivered at the annual meeting of the American Economic Association, in 1967. It is based in Knut Wicksell’ concept of “natural” rate, which defines how there will be no permanent changes in the considered variable below or MARSHALLIAN AND HICKSIAN DEMANDS Marshallian and Hicksian demands stem from two ways of looking at the same problem- how to obtain the utility we crave with the budget we have. Consumption duality expresses this problem as two sides of the same coin: keeping our budget fixed and maximising utility (primal demand, which leads us to Marshallian demand curves) or setting a target level of utility and minimising the cost NEW KEYNESIAN ECONOMICS: GEORGE AKERLOF New Keynesian Economics would keep on exploring market failure one breakdown at a time. George Arthur Akerlof, born in 1940, is an American economist and professor at University of California, Berkeley. He was awarded the Nobel Prize in Economic Sciences in 2001 WELFARE ECONOMICS II: KALDOR'S CRITERION he Kaldor criterion is a compensation criterion developed by Nicholas Kaldor in his paper “Welfare Propositions of Economics and Interpersonal Comparisons of Utility”, 1939. This criterion is satisfied if state Y is preferred to state X and there is such a compensation and reassignment that Y turns to Yˈ that is at least as good as X in a Pareto sense.POLICONOMICS
Welfare economics I. Welfare economics analyses different states in which markets or the economy can be. Its main objective is to find an indicator or measure in order to guarantee that markets are behaving optimally, thus also guaranteeing that consumer welfare is as high as possible. Even though welfare was already analysed by economists such MONOPOLY I: LERNER INDEX The Lerner index measures a firm’s level of market power by relating price to marginal cost.When either exact prices or information on the cost structure of the firm are hard to get, the Lerner index uses price elasticity of demand in order to measure market power: the Lerner index is equivalent to the inverse of the elasticity in its absolute value faced by the firm when price is set to PRODUCTION IN THE SHORT RUN The short run is considered the period of time where fixed costs are still fixed, which basically means that, if you have a factory, you have to make do with it because you can neither sell it, nor make it bigger, nor rent half of it: you are stuck with it for the time being. Capital is also considered fixed, meaning that, in the short run, all you can play around with are your variable costs MARSHALLIAN AND HICKSIAN DEMANDS Marshallian and Hicksian demands stem from two ways of looking at the same problem- how to obtain the utility we crave with the budget we have. Consumption duality expresses this problem as two sides of the same coin: keeping our budget fixed and maximising utility (primal demand, which leads us to Marshallian demand curves) or setting a target level of utility and minimising the cost PERFECT COMPETITION I: SUPPLY AND DEMAND The demand and supply curves define the market clearing, that is, where the demand of the products meets its supply. At this point we have what is known as, an equilibrium point, with its corresponding price and quantity of equilibrium. It is possible for disequilibrium to occur when the amount demanded does not equal the amount supplied. NEW CLASSICAL MACROECONOMICS: ROBERT LUCAS Robert Emerson Lucas, Jr., born in 1937, is an American economist and Professor at the University of Chicago. For many, Lucas is probably one of the most notable economists of all times and one of the most influential economists since the late 1970s. It was in the year 1995 when he won the Nobel Prize of Economic Sciences for his development GAME THEORY II: BATTLE OF THE SEXES Cournot duopoly. In the battle of the sexes, a couple argues over what to do over the weekend. Both know that they want to spend the weekend together, but they cannot agree over what to do. The man prefers to go watch a boxing match, whereas the woman wants to go shopping. This is a classical example of a coordination game, analysed in game INFLATION & UNEMPLOYMENT I: MONETARY POLICY Monetary policies are demand-side economic policies through which the central bank of a country acts on the amount of money and interest rates in order to influence on the income levels, output and unemployment in the economy, being the interest rate the link binding money and income. The main tools used by monetary policies are open market operations, loans to commercial banks, and the use of OLIGOPOLY II: ENTRY BARRIERS Entry barriers (or barriers to entry) are obstacles that stop or prevent the entrance of a firm in a specific market. It is associated with the situation in which a firm wants to enter a market due to high profits or increasing demand but cannot do so because of these barriers. In Michael Porter’s model of competitive analysis, barriers are a fundamental element to gauge the level of NEOCLASSICAL ECONOMICS: IRVING FISHER Irving Fisher was an American economist (1867-1947), professor of Political Economy at Yale University, known for his contributions to quantitative economics (works such as “The Nature of Capital and Income”, 1906, and “The Purchasing Power of Money”, 1911)POLICONOMICS
Welfare economics I. Welfare economics analyses different states in which markets or the economy can be. Its main objective is to find an indicator or measure in order to guarantee that markets are behaving optimally, thus also guaranteeing that consumer welfare is as high as possible. Even though welfare was already analysed by economists suchIS-LM-BP MODEL
The IS-LM-BP model (also known as IS-LM-BoP or Mundell-Fleming model) is an extension of the IS-LM model, which was formulated by the economists Robert Mundell and Marcus Fleming, who made almost simultaneously an analysis of open economies in the 60s.Basically we could say that the Mundell-Fleming model is a version of the IS-LM model for an open economy.LOANABLE FUNDS
Loanable funds. Net capital outflows (NCOs, also called net foreign investment) make reference to the difference between the acquisition of foreign assets by domestic residents and the acquisition of domestic assets by non-residents. Therefore, it has to do with savings and investment (loanable funds) and foreign currency exchange.ELLSBERG PARADOX
Ellsberg paradox. The Ellsberg’s paradox was developed by Daniel Ellsberg in his paper “Risk, Ambiguity, and the Savage Axioms”, 1961. It concerns subjective probability theory, which fails to follow the expected utility theory, and confirms Keynes ’ 1921 previous formulation. This paradox is usually explained with the nextexperiment
MONOPOLY I: LERNER INDEX The Lerner index measures a firm’s level of market power by relating price to marginal cost.When either exact prices or information on the cost structure of the firm are hard to get, the Lerner index uses price elasticity of demand in order to measure market power: the Lerner index is equivalent to the inverse of the elasticity in its absolute value faced by the firm when price is set to ECONOMIES OF LEARNING Economies of learning derive from the know-howpicked up through experience. The main difference between this and economies of scale or economies of scope is the fact that it is not correlated to production levels in the same way: it does not depend on producing more quantity or a wider portfolio, but from becoming a true specialist in a certain field, by producing a greater cumulative amountALLAIS PARADOX
Allais paradox. The Allais paradox was developed by Maurice Allais in his paper “Le Comportement de l’homme rationnel devant le risque: critique des postulats et axiomes de l’école américaine”, 1953 and it describes the empirically demonstrated fact that individuals’decisions can be
STACKELBERG DUOPOLY
Stackelberg duopoly, also called Stackelberg competition, is a model of imperfect competition based on a non-cooperative game. It was developed in 1934 by Heinrich Stackelberg in his “Market Structure and Equilibrium” and represented a breaking point in the study of market structure, particularly the analysis of duopolies since it was a model based on different starting assumptions and MONETARISM: NATURAL RATE OF UNEMPLOYMENT The term natural rate of unemployment was introduced by Milton Friedman in 1968, in his article “The Role of Monetary Policy”, following his presidential address delivered at the annual meeting of the American Economic Association, in 1967. It is based in Knut Wicksell’ concept of “natural” rate, which defines how there will be no permanent changes in the considered variable below or RICARDIAN DISTRIBUTION THEORY Ricardian distribution theory. The importance of David Ricardo ‘s model is that it was one of the first models used in Economics, aimed at explaining how income is distributed in society. Starting assumptions: -there is only one industry, agriculture; only one good, grain; -there are three kinds of people:POLICONOMICS
Welfare economics I. Welfare economics analyses different states in which markets or the economy can be. Its main objective is to find an indicator or measure in order to guarantee that markets are behaving optimally, thus also guaranteeing that consumer welfare is as high as possible. Even though welfare was already analysed by economists suchIS-LM-BP MODEL
The IS-LM-BP model (also known as IS-LM-BoP or Mundell-Fleming model) is an extension of the IS-LM model, which was formulated by the economists Robert Mundell and Marcus Fleming, who made almost simultaneously an analysis of open economies in the 60s.Basically we could say that the Mundell-Fleming model is a version of the IS-LM model for an open economy.LOANABLE FUNDS
Loanable funds. Net capital outflows (NCOs, also called net foreign investment) make reference to the difference between the acquisition of foreign assets by domestic residents and the acquisition of domestic assets by non-residents. Therefore, it has to do with savings and investment (loanable funds) and foreign currency exchange.ELLSBERG PARADOX
Ellsberg paradox. The Ellsberg’s paradox was developed by Daniel Ellsberg in his paper “Risk, Ambiguity, and the Savage Axioms”, 1961. It concerns subjective probability theory, which fails to follow the expected utility theory, and confirms Keynes ’ 1921 previous formulation. This paradox is usually explained with the nextexperiment
MONOPOLY I: LERNER INDEX The Lerner index measures a firm’s level of market power by relating price to marginal cost.When either exact prices or information on the cost structure of the firm are hard to get, the Lerner index uses price elasticity of demand in order to measure market power: the Lerner index is equivalent to the inverse of the elasticity in its absolute value faced by the firm when price is set to ECONOMIES OF LEARNING Economies of learning derive from the know-howpicked up through experience. The main difference between this and economies of scale or economies of scope is the fact that it is not correlated to production levels in the same way: it does not depend on producing more quantity or a wider portfolio, but from becoming a true specialist in a certain field, by producing a greater cumulative amountALLAIS PARADOX
Allais paradox. The Allais paradox was developed by Maurice Allais in his paper “Le Comportement de l’homme rationnel devant le risque: critique des postulats et axiomes de l’école américaine”, 1953 and it describes the empirically demonstrated fact that individuals’decisions can be
STACKELBERG DUOPOLY
Stackelberg duopoly, also called Stackelberg competition, is a model of imperfect competition based on a non-cooperative game. It was developed in 1934 by Heinrich Stackelberg in his “Market Structure and Equilibrium” and represented a breaking point in the study of market structure, particularly the analysis of duopolies since it was a model based on different starting assumptions and MONETARISM: NATURAL RATE OF UNEMPLOYMENT The term natural rate of unemployment was introduced by Milton Friedman in 1968, in his article “The Role of Monetary Policy”, following his presidential address delivered at the annual meeting of the American Economic Association, in 1967. It is based in Knut Wicksell’ concept of “natural” rate, which defines how there will be no permanent changes in the considered variable below or RICARDIAN DISTRIBUTION THEORY Ricardian distribution theory. The importance of David Ricardo ‘s model is that it was one of the first models used in Economics, aimed at explaining how income is distributed in society. Starting assumptions: -there is only one industry, agriculture; only one good, grain; -there are three kinds of people:POLICONOMICS
Welfare economics I. Welfare economics analyses different states in which markets or the economy can be. Its main objective is to find an indicator or measure in order to guarantee that markets are behaving optimally, thus also guaranteeing that consumer welfare is as high as possible. Even though welfare was already analysed by economists such EXPECTATIONS-AUGMENTED PHILLIPS CURVE The expectations-augmented Phillips curve introduces adaptive expectations into the Phillips curve.These adaptive expectations, which date from Irving Fisher ’s book “The Purchasing Power of Money”, 1911, were introduced into the Phillips curve by monetarists, specially Milton Friedman.Therefore, we could say that the expectations-augmented Phillips curve was first used toMANAGED FLOAT
A managed or dirty float is a flexible exchange rate system in which the government or the country’s central bank may occasionally intervene in order to direct the country’s currency value into a certain direction. This is generally done in order to act as a buffer against economic shocks and hence soften its effect in the economy.CAMBRIDGE SCHOOL
Cambridge school | Policonomics. Mar 22. Lope Gallego. -. Cambridge school. Name given to British economist Alfred Marshall and his followers, who were also part of the neoclassical school of economics, such as Arthur C. Pigou and Francis Y. Edgeworth, which fully assimilated the concepts and methods of marginalism. They are alsoconsidered to
COURNOT DUOPOLY
Cournot duopoly, also called Cournot competition, is a model of imperfect competition in which two firms with identical cost functions compete with homogeneous products in a static setting. It was developed by Antoine A. Cournot in his “Researches Into the Mathematical principles of the Theory of Wealth”, 1838. Cournot’s duopoly represented the creation of the study of oligopolies, more PERFECT COMPETITION I: SUPPLY AND DEMAND The demand and supply curves define the market clearing, that is, where the demand of the products meets its supply. At this point we have what is known as, an equilibrium point, with its corresponding price and quantity of equilibrium. It is possible for disequilibrium to occur when the amount demanded does not equal the amount supplied. THE MARKET FOR LEMONS “The Market for ‘Lemons’” is a key article written by George Akerlof in 1970, which aims to explain some of the market failures derived from imperfect information, in this case asymmetry.The paper itself is available on the bibliography and is characterised by its approachability and humour: as Akerlof himself stated, he lacked the mathematical dexterity to fully model the problem PERFECT COMPETITION I: SHORT RUN SUPPLY CURVE Perfect competition I: Short run supply curve. Summary. Even though perfect competition is hard to come by, it’s a good starting point to understand market structures. A deep understanding of how competitive markets work and are formed is the cornerstone to understand why it’s so hard to reach them. In this first LearningPath on perfect
GAME THEORY II: COURNOT DUOPOLY Cournot duopoly, also called Cournot competition, is a model of imperfect competition in which two firms with identical cost functions compete with homogeneous products in a static setting. It was developed by Antoine A. Cournot in his “Researches Into the Mathematical principles of the Theory of Wealth”, 1838. Cournot’s duopoly represented the creation of the study of oligopolies, more OLIGOPOLY II: ENTRY BARRIERS Entry barriers (or barriers to entry) are obstacles that stop or prevent the entrance of a firm in a specific market. It is associated with the situation in which a firm wants to enter a market due to high profits or increasing demand but cannot do so because of these barriers. In Michael Porter’s model of competitive analysis, barriers are a fundamental element to gauge the level ofPOLICONOMICS
Welfare economics I. Welfare economics analyses different states in which markets or the economy can be. Its main objective is to find an indicator or measure in order to guarantee that markets are behaving optimally, thus also guaranteeing that consumer welfare is as high as possible. Even though welfare was already analysed by economists suchIS-LM-BP MODEL
The IS-LM-BP model (also known as IS-LM-BoP or Mundell-Fleming model) is an extension of the IS-LM model, which was formulated by the economists Robert Mundell and Marcus Fleming, who made almost simultaneously an analysis of open economies in the 60s.Basically we could say that the Mundell-Fleming model is a version of the IS-LM model for an open economy. ECONOMIES OF LEARNING Economies of learning derive from the know-howpicked up through experience. The main difference between this and economies of scale or economies of scope is the fact that it is not correlated to production levels in the same way: it does not depend on producing more quantity or a wider portfolio, but from becoming a true specialist in a certain field, by producing a greater cumulative amount MARSHALLIAN AND HICKSIAN DEMANDS Marshallian and Hicksian demands stem from two ways of looking at the same problem- how to obtain the utility we crave with the budget we have. Consumption duality expresses this problem as two sides of the same coin: keeping our budget fixed and maximising utility (primal demand, which leads us to Marshallian demand curves) or setting a target level of utility and minimising the cost EXPECTATIONS-AUGMENTED PHILLIPS CURVE The expectations-augmented Phillips curve introduces adaptive expectations into the Phillips curve.These adaptive expectations, which date from Irving Fisher ’s book “The Purchasing Power of Money”, 1911, were introduced into the Phillips curve by monetarists, specially Milton Friedman.Therefore, we could say that the expectations-augmented Phillips curve was first used to A.10 MARSHALLIAN AND HICKSIAN DEMAND CURVES Marshallian and Hicksian demand curves meet where the quantity demanded is equal for both sides of the consumer choice problem (maximising utility or minimising cost). Marshallian demand makes more sense when we look at goods or services that make up a large part of our expenses. Here, the income effect is very large. MONETARISM: NATURAL RATE OF UNEMPLOYMENT The term natural rate of unemployment was introduced by Milton Friedman in 1968, in his article “The Role of Monetary Policy”, following his presidential address delivered at the annual meeting of the American Economic Association, in 1967. It is based in Knut Wicksell’ concept of “natural” rate, which defines how there will be no permanent changes in the considered variable below or PERFECT COMPETITION II: COST VARIATION Lope Gallego. -. Perfect competition II: Cost variation. Summary. Firms in a perfectly competitive market may encounter some problems that can decrease their competitiveness and may even force them out of the market. The way they deal with problems will determine whether they can stay in the market. In this Learning Path we learn aboutthese
ELLSBERG PARADOX
Ellsberg paradox. The Ellsberg’s paradox was developed by Daniel Ellsberg in his paper “Risk, Ambiguity, and the Savage Axioms”, 1961. It concerns subjective probability theory, which fails to follow the expected utility theory, and confirms Keynes ’ 1921 previous formulation. This paradox is usually explained with the nextexperiment
NEW KEYNESIAN ECONOMICS: GEORGE AKERLOF New Keynesian Economics would keep on exploring market failure one breakdown at a time. George Arthur Akerlof, born in 1940, is an American economist and professor at University of California, Berkeley. He was awarded the Nobel Prize in Economic Sciences in 2001POLICONOMICS
Welfare economics I. Welfare economics analyses different states in which markets or the economy can be. Its main objective is to find an indicator or measure in order to guarantee that markets are behaving optimally, thus also guaranteeing that consumer welfare is as high as possible. Even though welfare was already analysed by economists suchIS-LM-BP MODEL
The IS-LM-BP model (also known as IS-LM-BoP or Mundell-Fleming model) is an extension of the IS-LM model, which was formulated by the economists Robert Mundell and Marcus Fleming, who made almost simultaneously an analysis of open economies in the 60s.Basically we could say that the Mundell-Fleming model is a version of the IS-LM model for an open economy. ECONOMIES OF LEARNING Economies of learning derive from the know-howpicked up through experience. The main difference between this and economies of scale or economies of scope is the fact that it is not correlated to production levels in the same way: it does not depend on producing more quantity or a wider portfolio, but from becoming a true specialist in a certain field, by producing a greater cumulative amount MARSHALLIAN AND HICKSIAN DEMANDS Marshallian and Hicksian demands stem from two ways of looking at the same problem- how to obtain the utility we crave with the budget we have. Consumption duality expresses this problem as two sides of the same coin: keeping our budget fixed and maximising utility (primal demand, which leads us to Marshallian demand curves) or setting a target level of utility and minimising the cost EXPECTATIONS-AUGMENTED PHILLIPS CURVE The expectations-augmented Phillips curve introduces adaptive expectations into the Phillips curve.These adaptive expectations, which date from Irving Fisher ’s book “The Purchasing Power of Money”, 1911, were introduced into the Phillips curve by monetarists, specially Milton Friedman.Therefore, we could say that the expectations-augmented Phillips curve was first used to A.10 MARSHALLIAN AND HICKSIAN DEMAND CURVES Marshallian and Hicksian demand curves meet where the quantity demanded is equal for both sides of the consumer choice problem (maximising utility or minimising cost). Marshallian demand makes more sense when we look at goods or services that make up a large part of our expenses. Here, the income effect is very large. MONETARISM: NATURAL RATE OF UNEMPLOYMENT The term natural rate of unemployment was introduced by Milton Friedman in 1968, in his article “The Role of Monetary Policy”, following his presidential address delivered at the annual meeting of the American Economic Association, in 1967. It is based in Knut Wicksell’ concept of “natural” rate, which defines how there will be no permanent changes in the considered variable below or PERFECT COMPETITION II: COST VARIATION Lope Gallego. -. Perfect competition II: Cost variation. Summary. Firms in a perfectly competitive market may encounter some problems that can decrease their competitiveness and may even force them out of the market. The way they deal with problems will determine whether they can stay in the market. In this Learning Path we learn aboutthese
ELLSBERG PARADOX
Ellsberg paradox. The Ellsberg’s paradox was developed by Daniel Ellsberg in his paper “Risk, Ambiguity, and the Savage Axioms”, 1961. It concerns subjective probability theory, which fails to follow the expected utility theory, and confirms Keynes ’ 1921 previous formulation. This paradox is usually explained with the nextexperiment
NEW KEYNESIAN ECONOMICS: GEORGE AKERLOF New Keynesian Economics would keep on exploring market failure one breakdown at a time. George Arthur Akerlof, born in 1940, is an American economist and professor at University of California, Berkeley. He was awarded the Nobel Prize in Economic Sciences in 2001LOANABLE FUNDS
Loanable funds. Net capital outflows (NCOs, also called net foreign investment) make reference to the difference between the acquisition of foreign assets by domestic residents and the acquisition of domestic assets by non-residents. Therefore, it has to do with savings and investment (loanable funds) and foreign currency exchange.BUSINESS CYCLES
Business cycle, as Joseph Schumpeter saw it, is the economic activity fluctuation that occurs over time, and that comes from the succession of expansionary and contracting seasons. It is analysed comparing real GDP to potential GDP (Y*). There are a few common characteristics, which help differentiate cycles, such as its phases, the way it oscillates, the periodicity and a few stylized facts: MONOPOLY I: LERNER INDEX The Lerner index measures a firm’s level of market power by relating price to marginal cost.When either exact prices or information on the cost structure of the firm are hard to get, the Lerner index uses price elasticity of demand in order to measure market power: the Lerner index is equivalent to the inverse of the elasticity in its absolute value faced by the firm when price is set toELLSBERG PARADOX
Ellsberg paradox. The Ellsberg’s paradox was developed by Daniel Ellsberg in his paper “Risk, Ambiguity, and the Savage Axioms”, 1961. It concerns subjective probability theory, which fails to follow the expected utility theory, and confirms Keynes ’ 1921 previous formulation. This paradox is usually explained with the nextexperiment
MANAGED FLOAT
A managed or dirty float is a flexible exchange rate system in which the government or the country’s central bank may occasionally intervene in order to direct the country’s currency value into a certain direction. This is generally done in order to act as a buffer against economic shocks and hence soften its effect in the economy. PRODUCTION IN THE SHORT RUN The short run is considered the period of time where fixed costs are still fixed, which basically means that, if you have a factory, you have to make do with it because you can neither sell it, nor make it bigger, nor rent half of it: you are stuck with it for the time being. Capital is also considered fixed, meaning that, in the short run, all you can play around with are your variable costsCAMBRIDGE SCHOOL
Cambridge school | Policonomics. Mar 22. Lope Gallego. -. Cambridge school. Name given to British economist Alfred Marshall and his followers, who were also part of the neoclassical school of economics, such as Arthur C. Pigou and Francis Y. Edgeworth, which fully assimilated the concepts and methods of marginalism. They are alsoconsidered to
PERFECT COMPETITION I: SUPPLY AND DEMAND The demand and supply curves define the market clearing, that is, where the demand of the products meets its supply. At this point we have what is known as, an equilibrium point, with its corresponding price and quantity of equilibrium. It is possible for disequilibrium to occur when the amount demanded does not equal the amount supplied. OLIGOPOLY II: ENTRY BARRIERS Entry barriers (or barriers to entry) are obstacles that stop or prevent the entrance of a firm in a specific market. It is associated with the situation in which a firm wants to enter a market due to high profits or increasing demand but cannot do so because of these barriers. In Michael Porter’s model of competitive analysis, barriers are a fundamental element to gauge the level of NEOCLASSICAL ECONOMICS: IRVING FISHER Irving Fisher was an American economist (1867-1947), professor of Political Economy at Yale University, known for his contributions to quantitative economics (works such as “The Nature of Capital and Income”, 1906, and “The Purchasing Power of Money”, 1911) Find the best Danish loans online with the lan penge, sms lan
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Welfare economics II The analysis of welfare economics is built around the concept of Pareto efficiency. However, this efficiency criterion does not always represent a satisfactory answer. Other times, certain optimality conditions cannot be satisfied, and therefore Pareto efficiency simply cannot be reached. In order to solve this problem, and to find a new way to establish which allocation is best, economists have been since searching for new criteria to make a more informed decision. In this Learning Path we’ll learn about some of these criteria, in order to understand them and...learning path
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Welfare economics I
Welfare economics analyses different states in which markets or the economy can be. Its main objective is to find an indicator or measure in order to guarantee that markets are behaving optimally, thus also guaranteeing that consumer welfare is as high as possible. Even though welfare was already analysed by economists such as Adam Smith or Jeremy Bentham, it was economists from the Classical School who thoroughly analysed the subject: Alfred Marshall saw a relationship between welfare and wealth, while other economists such as Vilfredo Pareto and Arthur C....learning path
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Monopolistic competition The analysis of monopolies, oligopolies and perfect competition shows us that neither is real. Monopolies and oligopolies (when collusion exists) are illegal and considered as really harmful for the economy and consumer’s welfare. On the...learning path
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Oligopoly II
In the previous Learning Path on oligopolies we learned what they are and what kinds of oligopolies exist. In this LP, we’ll learn about how oligopolists can collude in order to maximise their profits,even...
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Oligopoly I
The bigger a firm is, the more efficient. Therefore, bigger and fewer firms in the market should mean lower prices and more goods produced. However, as we can see everyday, this is not really the...learning path
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Monopoly II
In the first Learning Path on monopolies, we learned about what they are, how they affect social welfare and we learned about a few types. In this second LP on monopolies, we’ll learn about a...learning path
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