Economics is the study of complex interactions between different agents of society—individuals, businesses, governments, and the global economy. Economic models make these interactions easier to understand. The most fundamental example is the two-sector model of the circular flow of income, which focuses on how economic activity is conducted through these interactions.   The two-sector model provides the foundation for understanding how income is generated, distributed, and spent. … Continue reading The Basic Two Sector Model

Technology and innovation are increasingly becoming more efficient, exponentially increasing the power of information technology, having a knock on effect on the economy. Essential jobs are comprised of tasks in which automation can become a substitute, lowering the amount of jobs required for the same final effect. However, it is essential that we understand the interactions between these technologies and employment. Significantly, this technology can … Continue reading The Role of Innovation in the Job Market

What is The Solow Growth Model?  Also known as the Solow-Swan model, the Solow growth model is a foundational economic framework often used to explain and recognise trends in long-run economic growth. It does this by looking at factors like capital accumulation, labour growth and productivity increases (often driven by technological progress).  Structure, Mathematics and Assumptions  N.B. this model assumes constant returns to scale, exogenous … Continue reading The Solow-Swan Growth Model