Economics 214 Lecture 14 Solving Simultaneous Equations.

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Presentation transcript:

Economics 214 Lecture 14 Solving Simultaneous Equations

Comparative Statics Economic analysis often considers the effect of a change in an exogenous variable on one or more endogenous variables. Comparative Statics compares the value of endogenous variables in one equilibrium to their value in another equilibrium. “Statics” refers to the fact that the analysis is not concerned with the way in which the new equilibrium is reached.

Comparative Statics Usually we vary one exogenous variable at a time in order to isolate the effect of that particular variable. The effort looks at the effect of a change in a variable, ceteris paribus, that is other things being equal.

Comparative Statics for IS-LM

Interest Rate Comparative Statics

Difference equations: Demand and Supply

Incidence of a Tax

Incidence of a Tax Continued