What is the Classical Model?
- It is a framework that originated in the 18th and 19th centuries, mainly associated with economists like Adam Smith and David Ricardo
- Basically describes the economy in the long run- in which resources are fully employed and everybody is working
Multiple assumptions for this model
- Assumed that pure competition exists
- People act based on their own self interest
- Wages and prices are flexible and not set
- Problems in economy are temporary and will fix themselves
- Say’s Law, where supply creates its own demand
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