State Welfare

State Welfare

State, Welfare. See Welfare State.

Static Analysis, the branch of economic method which studies the relationship between the factors determining an equilibrium position (the 'conditions' of equilibrium) without reference to the process of adjustment by which it was reached. 'Comparative statics', as the term implies, compares various positions of equilibrium achieved by attaching different values to the determinants without regard to the process by which change 5s effected. It can be contrasted with dynamic analysis, which studies the process or 'time-path' of adjustment between one equilibrium position and the next. If, starting from an original 'no change' position of rest or equilibrium at a price which balances supply of and demand for a commodity, consumers' tastes change so that at each possible price more of it is demanded than before, forces will be set in motion which will eventually result in a new equilibrium position in which a larger quantity will be bought and sold at (possibly) a different price. Comparative static analysis compares the new with the old equilibrium: dynamic analysis examines how price and quantity get from the old to the new position. Static analysis thus rests upon the device of assuming important determinants to be fixed so that the influence of other (variable) determinants on the equilibrium position can be isolated and studied. Despite their simplicity, such methods can be fruitful.


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