Economics 214
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Economics 214. Lecture 13 Systems of Equations. Examples of System of Equations. Demand and Supply IS-LM Aggregate Demand and Supply. Demand and Supply. IS-LM. Solving System of Equations. Repeated Substitution Matrix Algebra or linear Algebra. Solving System of Equations.

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Economics 214

Lecture 13

Systems of Equations


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Examples of System of Equations

  • Demand and Supply

  • IS-LM

  • Aggregate Demand and Supply




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Solving System of Equations

  • Repeated Substitution

  • Matrix Algebra or linear Algebra


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Solving System of Equations

  • Economic Models typically consist of a number of equations that represent identities, behavioral relationships, and conditions that constitute an equilibrium.

  • These equations include both variables, which are economic quantities and parameters, which are unvarying constants.


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Solving Systems of Equations

  • Variables in a system are exogenous if determined outside the system or endogenous if the are determined within the system.

  • A solution to the model is a representation of the endogenous variables as functions of only the parameters of the model and the exogenous variables.






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