"An economic model is a theoretical construct representing economic processes by a set of variables and a set of logical and/or quantitative relationships between them."
The creation and analysis of mathematical models to understand and predict economic behavior.
Microeconomics: This is the study of how individuals and firms make decisions about production, consumption, and exchange of goods in a market economy. It examines the behavior of markets and the interaction between buyers and sellers.
Macroeconomics: This is the study of the functioning of an economy as a whole, focusing on economic aggregates such as national income, output, employment, and inflation. It examines the factors that influence economic growth and stability.
Game Theory: This is the study of strategic interaction among individuals or firms in situations of conflict or cooperation. It examines how decision-makers interact and make decisions in situations where the outcome depends on the actions of others.
Probability and Statistics: This is the study of the mathematical tools used for analyzing data, testing hypotheses and making predictions. It examines the concepts of probability, expected value, standard deviation, correlation, regression, and hypothesis testing.
Optimization Methods: This is the study of the techniques used to maximize or minimize an objective function subject to constraints. It examines linear programming, non-linear programming, and dynamic programming.
Financial Modeling: This is the study of the mathematical representations of financial systems including securities, interest rates, and derivatives. It examines the models used to value financial assets and to manage financial risk.
Econometrics: This is the study of the statistical methods used to estimate and test economic theories. It examines how to collect and analyze data, and how to use statistical techniques to estimate parameters and test hypotheses.
Behavioral Economics: This is the study of how individuals make decisions in the real world, taking into account psychological and social factors that influence decision-making. It examines how people's biases and heuristics affect their behavior and how this affects economic outcomes.
Industrial Organization: This is the study of the behavior of firms within markets, focusing on issues such as market structure, pricing, and competition. It examines how firms make strategic decisions about pricing, advertising, and other aspects of market behavior.
Environmental Economics: This is the study of how economic activities affect the environment, and how the environment affects economic activities. It examines issues such as pollution, natural resource depletion, and climate change, and how economic policies can be used to manage these problems.
Market equilibrium models: These models are used to determine the price and quantity of goods and services in a competitive market.
Game theory models: These models are used to analyze strategic interactions between players in a variety of settings, including auctions, bargaining, and decision-making.
Input-output models: These models are used to measure the relationships between various sectors of the economy by analyzing how the outputs of one sector become the inputs of other sectors.
Computable general equilibrium models: These models are used to simulate the interactions of economic agents in complex economies, taking into account the various factors that influence economic activity.
Agent-based models: These models simulate the actions of individuals or decision-making entities, such as firms or governments, to identify the various factors that influence economic behavior.
Economic forecasting models: These models are used to predict future economic trends by analyzing historical data and current events.
Cost-benefit analysis models: These models are used to compare the costs and benefits of various economic policies or projects to determine the most efficient allocation of resources.
Econometric models: These models are used to analyze the relationships between various economic variables, such as income, productivity, and inflation, to understand how they are affected by different factors.
Financial models: These models are used to analyze the behavior of financial markets and financial instruments, such as stocks, bonds, and derivatives.
Industrial organization models: These models are used to analyze the structure and behavior of firms in different industries to understand how they affect competition and market outcomes.
"The economic model is a simplified, often mathematical, framework designed to illustrate complex processes."
"Frequently, economic models posit structural parameters."
"A model may have various exogenous variables."
"Those variables may change to create various responses by economic variables."
"Methodological uses of models include investigation, theorizing, and fitting theories to the world."