Computable general equilibrium

Computable general equilibrium is like playing with a toy town! Toy town has many different people and things, like a grocery store, a bank, and a park. We can use our toy cars to imagine people going from one place to another and buying things they need.

Just like in our toy town, the economy of a big city or even a country is made up of many different people and things. A computable general equilibrium model is like a super fancy toy town where we can predict what happens if something changes.

For example, if the price of apples goes up, we can see how people will react. Maybe they will start to buy fewer apples and switch to a different fruit. Or maybe they will spend less money on other things to be able to afford the more expensive apples. The computable general equilibrium model helps us understand all of these reactions in a big economy by tracking how people and things interact with each other.

The model uses lots of math to keep track of everything happening in our toy town. We can tell it what the rules are - like how much things cost, how much money people make, and how much they like certain products. Then we can use the model to see how different changes will affect the economy.

People use computable general equilibrium models to understand lots of different things! For example, economists might use them to see how a new trade agreement will affect different industries in a country. Or they might use the model to predict what will happen if people start using more renewable energy instead of oil.

Although computable general equilibrium models are complicated, they're really helpful for understanding how the economy works and predicting what will happen if things change.