Production can be defined as the process by which inputs are used to make outputs. Inputs, also known as factors of production, include resources such as labour, capital and raw…
Price control refers to government intervention in the market where a price higher or lower than the equilibrium price is fixed by the government to protect the interests of the…
Market equilibrium is a situation where the quantity demanded of a commodity is equal to its quantity supplied. The price and quantity associated with this equilibrium are known as equilibrium…
In economics, the concept of elasticity holds special significance. Economists deal with various types of elasticity such as price or income elasticities of demand. In many cases, it is preferred…
The theory of demand and supply includes the law of demand and the law of supply. These laws explain the behaviour of demand and supply in response to changing prices.…
Autocorrelation Function (ACF) and Partial Autocorrelation Function (PACF) can provide valuable insights into the behaviour of time series data. They are often used to decide the number of Autoregressive (AR)…
Seasonality, sometimes referred to as seasonal variation, is common in economic time series. The time series variables may change in a cyclical pattern with time. This cyclical pattern is termed…
Autoregressive Integrated Moving Average (ARIMA) models are often used for forecasting purposes. These models for time series data have been observed to provide accurate forecasts. Additionally, these models allow dynamic…
The Sargan Test of Overidentifying Restrictions is applied to check the validity of the instruments used in simultaneous equation models. As the name suggests, it is applicable to overidentified model…
The Two-Stage Least Squares or 2SLS is used to estimate simultaneous equation models or system of equations. Moreover, 2SLS uses a single equation approach. That is, each equation in the…
The Durbin-Wu-Hausman Test of Endogeneity is used to determine whether the endogenous regressors in a simultaneous equation model are truly endogenous. Simultaneous equation models include both endogenous and exogenous variables.…
The VAR-VECM Goodness of fit can be analyzed using similar methods. After estimating Vector Autoregressive (VAR) or Vector Error Correction Mechanism (VECM), it is essential to assess how well the…
The Vector Error Correction Mechanism (VECM) is estimated in the presence of cointegration among the system of variables. It allows us to estimate short-run as well as long-run coefficients. Using…
Vector Error Correction Mechanism (VECM) models are a special application of VAR or Vector Autoregressive Models. The specification of VECM models involves the introduction of error correction terms into the…
Cardinal and ordinal utility analysis assume that all the variables, such as prices and income, are known with certainty. However, this is not the case in reality. Consumers have to…
