Homework # 01 Essay Example | Topics and Well Written Essays - 500 words

Homework # 01 - Essay Example red to particular situations and specific markets, nowadays economic models are customized to illustrate outstanding features of reality describing special problem under discussion.Even though many economists claimed that major economic problems were solved, unemployment by money wages was hard to solve. The economists were unable to identify the cause of economic growth. Growth theory led to a new modeling to help address the question. It was able to deal with goods, capital; that varied continuously in quality. In addition, the theory helped in discovering asymmetric information. Growth in education was able to explain growth residual hence accounting for increases in both labour force and capital. However, the asymmetric information needed further exploration before it is documented. With the help of the automobile market, Akerlof was able to discover that information asymmetry played a key role in business cycles. It is a major issue in those markets that quality of goods is hard to see without casual inspection. With the help of mathematics, he proved that asymmetric information could lead to the collapse of used cars market at the expense of new