Book contents
- Frontmatter
- Contents
- List of tables and boxes
- Preface
- 1 Introduction
- 2 Demand and supply dynamics
- 3 Simple Keynesian dynamics
- 4 Constructing trajectories in the phase plane
- 5 IS-LM dynamics
- 6 Inflation–unemployment dynamics
- 7 Dynamics of the firm
- 8 Saddles and rational expectations
- 9 Fiscal dynamics and the Maastricht Treaty
- 10 A little bit of chaos
- Brief answers to selected exercises
- Further reading
- Index
4 - Constructing trajectories in the phase plane
Published online by Cambridge University Press: 05 June 2012
- Frontmatter
- Contents
- List of tables and boxes
- Preface
- 1 Introduction
- 2 Demand and supply dynamics
- 3 Simple Keynesian dynamics
- 4 Constructing trajectories in the phase plane
- 5 IS-LM dynamics
- 6 Inflation–unemployment dynamics
- 7 Dynamics of the firm
- 8 Saddles and rational expectations
- 9 Fiscal dynamics and the Maastricht Treaty
- 10 A little bit of chaos
- Brief answers to selected exercises
- Further reading
- Index
Summary
Trajectories and fixed points
In chapter 2 we considered two interrelated markets, the corn market that was animal feed for the hog market, and so it was necessary to consider these markets simultaneously. There are many such markets in economics, both in microeconomics and macroeconomics. Because they are so pervasive we need to set up a relatively simple framework in which to consider their dynamics. As in chapter 1, we shall here be general and simply refer to a market for x and a market for y, where these markets are interrelated. In other words, in order to solve for an equilibrium in market x we need to know not only the value of x but also the value for y; and to determined the equilibrium for market y we need to know not only the value of y but also the value for x.
We also mentioned in chapter 1 that we can specify models either in discrete time or in continuous time, but that sometimes these give different dynamics – even if the comparative statics appears the same. This is especially true when dealing with two or more relationships. We shall consider in this book models with only two fundamental dynamic relationships. It is much easier to establish the time path of models of two markets if we set the model up in terms of continuous time. Of course, if the model is naturally a discrete time model, as in the case of the corn–hog markets with one-period supply lags, then we must also consider the dynamics of two markets which involve discrete time.
- Type
- Chapter
- Information
- An Introduction to Economic Dynamics , pp. 69 - 90Publisher: Cambridge University PressPrint publication year: 2001