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Equilibrium and Variables in Irving Fisher's Physical Model
Irving Fisher's hydraulic model provides a clear illustration of economic variables. In this physical analogy of an economy, the prices of goods are the endogenous variables, as their values are determined by the model's internal dynamics. Conversely, the supply of goods is an exogenous variable, set externally by the modeler. The model is designed to show how changes in an exogenous factor, like supply, affect the endogenous prices to reach a new equilibrium.
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Equilibrium and Variables in Irving Fisher's Physical Model