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A Kaldor–Hicks improvement, named for Nicholas Kaldor and John Hicks, is an economic re-allocation of resources among people that captures some of the intuitive appeal of a Pareto improvement, but has less stringent criteria and is hence applicable to more circumstances.
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 economic model is a simplified, often mathematical, framework designed to illustrate complex processes. Frequently, economic models posit structural parameters. [1]
In microeconomics, economic efficiency, depending on the context, is usually one of the following two related concepts: [1] Allocative or Pareto efficiency : any changes made to assist one person would harm another.
The AK model, which is the simplest endogenous model, gives a constant-savings rate of endogenous growth and assumes a constant, exogenous, saving rate. It models technological progress with a single parameter (usually A). The model is based on the assumption that the production function does not exhibit diminishing returns to scale.
The model argues that the O-ring development theory explains why rich countries produce more complicated products, have larger firms and much higher worker productivity than poor countries. [ 2 ] The name is a reference to the 1986 Challenger shuttle disaster , a catastrophe caused by the failure of O-rings .
Learning-by-doing is a concept in economic theory by which productivity is achieved through practice, self-perfection and minor innovations. An example is a factory that increases output by learning how to use equipment better without adding workers or investing significant amounts of capital.
According to this simple sequential model, the market was the source of new ideas for directing R&D, which had a reactive role in the process. The stages of the "market pull " model are: Market need—Development—Manufacturing—Sales. The linear models of innovation supported numerous criticisms concerning the linearity of the models.
Examples of satisfying criteria would be adequate profit or share or the market and fair price. They recognize that the world they perceive is a drastically simplified model of the real world. They are content with the simplification because they believe the real world is mostly empty anyway.