[ Prev ] [ Index ] [ Next ] SMART handout for AGEC618

Comparative Statics


Definition

Comparative statics researches how the endogenous variables (determined within the model) are affected by changes in the exogenous variables (determined outside the model).


It is used to solve:
Problem (1) Optimization problems
Problem (2) Equilibrium problems
It requires the equilibrium to be stable, otherwise when the exogenous parameter changes the market will not converge to the new equilibrium identified by the mathematical procedure.


Note


Example