)
Fig. 25 Comparative static equilibrium analysis. The initial level of national income is Y1 (at point A) where the AGGREGATE DEMAND SCHEDULE (AD1) intersects the AGGREGATE SUPPLY SCHEDULE (AS).
comparative static equilibrium analysis
a method of economic analysis that compares the differences between two or more equilibrium states that result from changes in EXOGENOUS VARIABLES. Consider, for example, the effect of a change in export demand on the EQUILIBRIUM LEVEL OF NATIONAL INCOME as shown in Fig. 25. Assume that foreigners demand more of the country's products. Exports rise and the aggregate demand schedule shifts upwards to a new level (AD2 ), resulting in the establishment of a new equilibrium level of national income Y2 (at point H). The effect of the increase in exports can then be measured by comparing the original level of national income with that of the new level of national income. See DYNAMIC ANALYSIS, EQUILIBRIUM MARKET PRICE ( CHANGES IN).Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005