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In the case of two goods and two individuals, the contract curve can be found as follows. Here refers to the final amount of good 2 allocated to person 1, etc., and refer to the final levels of utility experienced by person 1 and person 2 respectively, refers to the level of utility that person 2 would receive from the initial allocation without trading at all, and and refer to the fixed total ...
Economic graphs are presented only in the first quadrant of the Cartesian plane when the variables conceptually can only take on non-negative values (such as the quantity of a product that is produced). Even though the axes refer to numerical variables, specific values are often not introduced if a conceptual point is being made that would ...
In economics, a Swan Diagram, also known as the Australian model (because it was originally published by Australian economist Trevor Swan [1] in 1956 to model the Australian economy during the Great Depression), represents the situation of a country with a currency peg.
In economics, an Edgeworth box, sometimes referred to as an Edgeworth-Bowley box, is a graphical representation of a market with just two commodities, X and Y, and two consumers. The dimensions of the box are the total quantities Ω x and Ω y of the two goods. Let the consumers be Octavio and Abby.
Theorem: If the function f is differentiable, the gradient of f at a point is either zero, or perpendicular to the level set of f at that point. To understand what this means, imagine that two hikers are at the same location on a mountain. One of them is bold, and decides to go in the direction where the slope is steepest.
The economic system as a subsystem of the environment: natural resources flow through the economy and end up as waste and pollution. The circular flow diagram is an abstraction of the economy as a whole. The diagram suggests that the economy can reproduce itself.
The lever is operated by applying an input force F A at a point A located by the coordinate vector r A on the bar. The lever then exerts an output force F B at the point B located by r B. The rotation of the lever about the fulcrum P is defined by the rotation angle θ in radians. Archimedes lever, Engraving from Mechanics Magazine, published ...
The Keynesian cross diagram is a formulation of the central ideas in Keynes' General Theory of Employment, Interest and Money. It first appeared as a central component of macroeconomic theory as it was taught by Paul Samuelson in his textbook, Economics: An Introductory Analysis .