Hotelling Location Model: How Competitors Cluster Together
The Hotelling Location Model explains why competing firms cluster at the market centre, balancing the pull of market share against...
Author: Majid Ali Sanghro
Tobin’s Q Theory: How Stock Markets Drive Corporate Investment
Tobin's Q Theory explains how the ratio of a firm's market value to its asset replacement cost drives corporate investment,...
Spence Signalling Model: How Education Signals More Than It Teaches
The spence signalling model explains how education functions as a costly signal of ability, allowing high-productivity workers to separate themselves...
Life-Cycle Hypothesis: How Households Save Across a Lifetime
The life-cycle hypothesis shows how households smooth consumption over their lifetime by borrowing when young, saving during peak earning years,...
Diamond-Dybvig Model: Why Bank Runs Happen
The Diamond-Dybvig model shows how banks' maturity transformation creates a vulnerability to self-fulfilling runs, and how deposit insurance and lender-of-last-resort...
Yield Curve Explained: What Bond Markets Tell Us
The yield curve plots bond yields across maturities, revealing market expectations about growth, inflation, and monetary policy, and has historically...
J-Curve Effect: Why Devaluation Hurts Before It Helps
The j-curve effect explains why currency depreciation worsens the trade balance before improving it, as valuation effects dominate in the...
Marshall-Lerner Condition: When Devaluation Improves Trade Balance
The Marshall-Lerner condition states that a currency depreciation improves the trade balance if the sum of export and import demand...
Lucas Critique: Why Policy Rules Change Behaviour
The lucas critique shows why estimated economic relationships change when policy rules change, reshaping macroeconomics and forcing models to separate...
Bond Duration and Convexity: How Maths Prices Interest-Rate Risk
Bond duration and convexity are the mathematical tools fixed-income markets use to measure how bond prices respond to interest-rate changes,...