An exogenous variable is a factor whose value is determined outside of an economic model and is set by the person using the model. Economists manipulate these variables to conduct experiments and observe the effects on the model's endogenous outcomes.

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An economic model is a simplified representation of reality, designed to answer a specific question. Its construction involves focusing on the most relevant economic elements and their relationships, while intentionally setting aside less critical details. This process of abstraction allows for a clearer understanding of the core mechanisms driving economic outcomes.

The Purpose and Nature of an Economic Model

To cite the ebook, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/.

To cite a unit, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/ Unit [unit number] (url).

CORE Econ - The Economy 2.0: Microeconomics

Malthusianism is a theory based on a simple economic model proposed by Thomas Malthus. This model establishes a feedback loop where agricultural output and living standards are determined by the working population, and these living standards in turn influence population growth. Based on this model, Malthus argued that any long-term, sustained increase in income per person was impossible, creating a 'poverty trap.' Although historical developments, particularly the Industrial Revolution, proved this ultimate conclusion to be incorrect, Malthus's analysis remains crucial for understanding the prolonged period of economic stagnation and low living standards that preceded his era.

Malthusianism

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.

Endogenous Variable in an Economic Model

Exogenous Variable in an Economic Model

In economics, mathematics functions as a specialized language. When used in conjunction with clear, descriptive text and standardized definitions for terms, it provides a powerful tool for communicating economic statements with a high degree of precision.

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