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Endogenous Variable in an Economic Model
An endogenous variable is a factor whose value is determined by the internal mechanics and relationships within an economic model. In essence, its value is generated by the model itself as a result of the model's assumptions and structure.
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CORE Econ
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.2 Technology and incentives - The Economy 2.0 Microeconomics @ CORE Econ
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Malthusianism
Endogenous Variable in an Economic Model
Exogenous Variable in an Economic Model
Use of Mathematics in Economic Models
Augustin Cournot's 1838 publication, 'Recherches sur les Principes Mathématiques de la Théorie des Richesses', was immediately celebrated by his contemporaries and fundamentally changed the study of economics upon its release.
An economist develops a model to understand how a nationwide increase in the price of gasoline affects the sales of electric vehicles. A critic dismisses the model as 'unrealistic' because it does not account for regional differences in public transportation availability. Which of the following statements provides the strongest justification for the economist's decision to exclude this detail?
Designing a Simplified Economic Model
A company manufactures a unique type of artisanal chocolate. Market analysis has determined the relationship between the price of a chocolate bar and the quantity consumers are willing to purchase. The data shows that at a price of $10 per bar, consumers will buy 5,000 bars per week. If the price is lowered to $8 per bar, consumers will buy 8,000 bars per week. The management team sets a new strategic goal: to sell 8,000 bars per week at a price of $10 per bar. Based on the principles of market demand, what is the most accurate assessment of this goal?
Evaluating the Usefulness of Simplified Representations
Evaluating Competing Economic Models
An urban planner is creating a model to predict the impact of a new subway line on rush-hour traffic congestion on major highways. The goal is to create a clear and useful tool for this specific purpose. Which of the following factors, if included, would most likely make the model less useful?
Economic Interpretations of Water Pollution
Designing an Economic Model
An economist is building a model to answer a specific question. Match each research question with the most appropriate simplifying assumption that would make the model useful for its intended purpose.
An economist is developing a model to analyze how a change in the national minimum wage affects employment levels among low-skilled workers. The model intentionally assumes that all low-skilled workers have identical productivity and that all firms are identical in their production processes. What is the most compelling reason for making these simplifications?
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An economic model is built to understand the housing market in a specific city. The model takes into account the city's current population, the average income of its citizens, and local construction costs. By analyzing how these factors influence the number of people wanting to buy homes and the number of homes available, the model calculates the average home price for that city. Which of the following is a variable whose value is determined by the internal workings of this model?
Analyzing a Simple Agricultural Market Model
Identifying an Internally Determined Variable
An economic model is created to forecast the number of new cars that will be sold in a country next year. The model's calculations are based on several key pieces of external data: the current national interest rates, the average price of gasoline, and the present unemployment rate. The model processes these pieces of data to produce its final forecast. Based on this description, the 'number of new cars sold' is a variable whose value is treated as a given input for the model.
An economic model is designed to determine the market price and total quantity of corn sold in a particular year. The model takes the amount of annual rainfall and the average cost of fertilizer as given starting points for its calculations. Match each variable from this model to the description that best fits its role.
Analyzing a Model's Internal Logic
In an economic model created to determine the equilibrium price of wheat, factors such as annual rainfall and the cost of fertilizer are treated as given inputs. The model then calculates the resulting market price based on these factors. Within this framework, the calculated price of wheat is a(n) ________ variable, as its value is solved for by the model itself.
An economist creates a simple model to determine the equilibrium price and quantity of coffee sold in a month. The model is given pre-determined values for average consumer income and the cost of coffee beans. Arrange the following items to show the logical sequence a model would follow to calculate its internally-determined variables.
A technology company develops a detailed mathematical model to decide the launch price for its new smartphone. The model uses the cost of the phone's components, the prices of competing phones, and the planned advertising budget as its primary inputs. After processing these inputs, the model calculates the specific price that is predicted to generate the most profit and also forecasts the total number of phones that will be sold at that price.
Which statement best analyzes the role of the 'launch price' within this company's model?
Critique of a Market Prediction Model
Equilibrium and Variables in Irving Fisher's Physical Model