If you are wondering what are the economic models And how can you improve the way you run your business? So, stay with us to find out all the details!
Economic models
The economic models they are a guide, a sketch, or an idea of how a certain economy behaves. It is used to be able to analyze the fluctuations, eventualities, and direction of an economy.
It is a map in which all the variables and directions that an economic model can have must be explained, analyzed, and understood, as well as it can only be applied to a specific product or company.
Characteristics of economic models
A model needs to be (usually) a graph that can accurately and easily explain the information about the economy to be analysed. Due to this, it can be said that two characteristics are necessary in order to have a successful economic model.
Simplification
It is difficult, but the graphs should not be too complicated with factors beyond our scope of understanding and analysis capacity, so a fundamental characteristic of this type of model is the simplicity that it can offer us to jump straight to the point.
Selection
This is one direction, in which you want to do the analysis, you always have to have a goal in mind, and calculating all possible outcomes is not a very reliable option. That is why you always have to consider the most important factor, or most important, when making an economic model.
Other ideas
It should be noted that although an economic model is one of the most useful sources when it comes to having an idea about a market, it is definitely not a miraculous tool that will do all the work for us, it will not directly give us ideas for entrepreneurship, nor nor will it give us each and every one of the different possible variations that could exist.
Objectives of the economic model
The economic models They allow studying complex interactions and making predictions about the future behavior of the economy. Reality is complex and our understanding of it is limited. Therefore, it has to be simplified, and the simplifiers are based on the relationship of the variables. His main ideas are:
- Understand the relationship between economic variables (formulate and test hypotheses): How everything works together, to get an idea if we can take advantage of it, if it will play against us, if it is not related, or how it can change in the future.
- Diagnosis of a particular situation or phenomenon: Choose the key elements of the economy that will be our support for the business plan.
- Forecast of the future behavior of the variables: Trying to predict the behavior of the variables is essential to aspire to have a stable business over time.
- Design of economic policies: Different types of economies can help or hinder different types of markets. Therefore, the economic political model must be taken into consideration, in order to get the most out of our company.
Types of models
Although at the level of the economy itself, the models can be divided into macroeconomic and microeconomic models. Both areas focus on:
- Macroeconomic models in general focus on showing how the general relationships between consumers and producers determine production and other variables. As well as we can include it in very influential factors such as inflation, or the demand for products.
- Microeconomic models investigate economic agents. An economic agent is the basic unit of operation in the model. In some economic models, a nation, a family or a government is considered as an agent. In other words, it focuses on a point of interest to the researchers and converges from there.
economic models of thought
The economic models; they can be considered "schools" of thought. At present, the main ones include: Monetarism, New classical economics, New Keynesian economics. Although they are definitely not the only ones that can exist on a day-to-day basis.
Macroeconomic
There are models that are applied in general situations, speaking in a macroeconomic scheme, for example, the Kalecki Model, the Phillips Model, the Kaldor Model. The main macroeconomic models are growth models. The IS-LM Model, the Heckscher-Ohlin Model, also called the H–O model, which in turn has given rise to several other proposals or models. etc.
Microeconomic
Among the best known microeconomic models; we can highlight the model of perfect competition, model of monopolistic competition and imperfect competition, models of supply, demand and associates; economic equilibrium models, cobweb model, general equilibrium theory, Bertrand equilibrium and Stackelberg equilibrium.
Importance of economic models
Definitely, it should be very clear what direction we have to take, and although it is difficult to try to investigate in depth all the economic models that we mention, it is undoubtedly recommended to do so, even with a few, to have a better calculation of our economic model, leading to a more accurate graph and finally better income as a company.
If you want to have a broader idea about how an economy is managed and how the market works, then you should visit this link: market types.
Thank you very much for having read the article, if you are interested, we cordially invite you to review the video that we leave here below, in which you will be able to have more specific knowledge about the economic models. It will surprise you!.