Aggregate Demand We know that when it comes to people demand for money – there are 3 elements that has the ability to change the decisions of the individuals in either spending more or less. And these elements are: Income (Output) Interest rate (I) Price Level (P) In generally we also know that the amount of cash people want to keep depends proportionately on the prices of those products or...
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Types and Strategies of Game Theory
Types of Game Theory Cooperative Game : It is an economic game played by firms in which players or firms can negotiate on binding contracts which allows them to make mixed or joint strategies. Example: Ahmed and Ali are buyer and seller respectively and they are bargaining over the price of a smartphone. If the smartphone's cost of production is Rs.10,000 and Ahmed values the smartphone at...
Game Theory: The Complete Guide to Nash Equilibrium, Dominance, Credible Threats and the Folk Theorem
The complete guide to game theory: von Neumann and the RAND Corporation, the Prisoner’s Dilemma, dominance, Nash equilibrium and its existence proof, mixed strategies, credible threats and commitment, the Folk Theorem, Cournot and Bertrand, OPEC’s discipline problem — with worked mathematics, four practice questions with answers, and the experimental evidence that common knowledge of rationality is false.
Circular Flow of Income
The Circular Flow of Income is a macroeconomic model showing how money, goods, and services flow continuously between households and firms — and how injections and leakages affect the size of the flow. The Basic Two-Sector Model In its simplest form, the circular flow of income involves just two groups of decision-makers: Households — who own the factors of production (labour, land, capital) and...
Standard Deviation
Definition Standard deviation is the positive square root of the mean of the squared deviations of values from their mean. It measures how spread out the values in a dataset are around the average. Standard deviation is the most widely used measure of dispersion in statistics. While the mean tells us where the centre of a dataset is, the standard deviation tells us how much individual values...
Quartile Deviation
Definition The quartile deviation is half the difference between the third quartile and the first quartile of a frequency distribution, or simply distribution. Mathematically, quartile deviation would be represented as follows; Quartile deviation is also known as semi-interquartile range. Here, the difference between the third and first quartiles is called interquartile range. The interquartile...
Basics of Correlation
Definition “Correlation is an analysis in which we study the degree of closeness of relationship between the variables.” Explanation Where the values of two variables vary in such a way that the movements i.e. increase or decrease, in one variable is connected with the movements of another variable, such variables are said to be as correlated. Therefore, correlation is the degree of...
Regression
Definition “Regression is a process by which we estimate one of the variables, which is dependent variable, on the basis of another variable, which is independent .” Dependent Variable Dependent variable is the one which is intended to be estimate or predicted is referred as dependent variable. Dependent variable is also known as regressand, predicted variable, responsive variable or explained...
Mode in Statistics
Definition The mode is defined as the value in the data, which occur the greatest number of times in an array of data. For example i. The mode of the values 2, 5, 7, 8, 9, 9 and 10 is 9 ii. The mode of the values 11, 12, 12, 14, 15, 15, 15, 17, 17 and 19 is 15. However, if each value occurs the same number of times then there will be no mode. There may be a case where two or more values occur...
Quartiles, Deciles and Percentiles
Introduction: In Statistics, we commonly encounter the concept of the median, which represents the middle value or mean of the two middle values in a dataset. However, there are other essential values that divide data into equal parts for more comprehensive analysis. Quartiles divide data into four parts, deciles into ten parts, and percentiles into one hundred parts. These measures provide...
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