The Classical Model builds on the principles developed in microeconomics to explain how equilibrium production and employment might be determined from profit maximizing and utility maximizing behavior.

Model Link:  The Classical Model
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Printable PDF Exercises

The EconModel presentation of the Classical Model first goes over the various model elements:

• Production
• Labor Demand
• Labor Supply
• Aggregate Supply and Demand
• Loanable Funds

You then trace out movements in the equilibrium for these markets given the following changes:

• Technology Shocks (view screenshot)
• Taxes on Labor Income
• Monetary and Fiscal Policy

Movie:  The Classical Model (40 seconds)

In addition to illustrating the properties of the Classical Model, these exercises provide the background against which the Keynesian models were developed.

Classic Economic Models

    Contents

Macroeconomics

Introduction
    Overview of Macro Models

Models in Chronological Order
    The Classical Model
    The Simple Keynesian Model
    The Keynesian IS/LM Model
    The Mundell-Fleming Model
    Real Business Cycles
    The IS/MP Model
    The Solow Growth Model

Financial Markets
    Utility-Based Valuation of Risk
    Mean-Variance Analysis:
        Risk vs. Expected Return
    Fixed Income Securities:
        Mortgage/Bond Calculator
    Growth Investments:
        Present Value Calculator

Microeconomics

Introduction
    Overview of Micro Models

Supply and Demand
    Basic Supply and Demand
    Who Pays a Sales Tax?
    The Cobweb Model and
        Inventory-Based Pricing

Theory of the Firm
    Perfect Competition
    Monopoly and
        Monopolistic Competition
    Price Discrimination
    The Demand for Labor

Theory of the Consumer
    Two Goods - Two Prices
    Intertemporal Substitution
    Labor Supply, Income Taxes,
        and Transfer Payments

Resources