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4 - Final Demand in a CGE Model

Published online by Cambridge University Press:  11 December 2020

Mary E. Burfisher
Affiliation:
Purdue University, Indiana
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Summary

In this chapter, we describe final demand by domestic agents – private households, government, and investors – and by the export market. Data in the Social Accounting Matrix (SAM) describe agents’ incomes and the commodity composition of their spending. The computable general equilibrium (CGE) model depicts demand by domestic agents as a three-stage decision. First, consumers decide on the quantities of each commodity in their consumption basket. Second, an “Armington” import aggregation function describes their choice between domestic and imported varieties of each commodity. In some CGE models, a third stage describes the sourcing of imports. We survey functional forms commonly used in CGE models to describe private household preferences. We also introduce the concept of “national welfare,” which is the monetary value of changes in a nation’s well-being following an economic shock.

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Publisher: Cambridge University Press
Print publication year: 2021

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  • Final Demand in a CGE Model
  • Mary E. Burfisher, Purdue University, Indiana
  • Book: Introduction to Computable General Equilibrium Models
  • Online publication: 11 December 2020
  • Chapter DOI: https://doi.org/10.1017/9781108780063.005
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  • Final Demand in a CGE Model
  • Mary E. Burfisher, Purdue University, Indiana
  • Book: Introduction to Computable General Equilibrium Models
  • Online publication: 11 December 2020
  • Chapter DOI: https://doi.org/10.1017/9781108780063.005
Available formats
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  • Final Demand in a CGE Model
  • Mary E. Burfisher, Purdue University, Indiana
  • Book: Introduction to Computable General Equilibrium Models
  • Online publication: 11 December 2020
  • Chapter DOI: https://doi.org/10.1017/9781108780063.005
Available formats
×