Chapter 1 Model Apps

Introduction to Macroeconomics

Explore the models of Chapter 1 without any code. Every chart below is live: move its slider to change one part of the model and watch the curves respond, and hover over a line to read its values.

← Back to Chapter 1: Introduction to Macroeconomics

See also: Chapter 1 Data Apps, the chapter’s data without code.

What a model does

Fig. 6: The structure of economic models

Move the slider to set a minimum wage; watch the outcomes box on the right, where the model computes the wage, employment and unemployment.

\[ L^s = \bar{a}\,w + \bar{\ell}, \qquad L^d = \bar{f} - w \]

\[ w = \max(w^*, \bar{w}_{\min}), \qquad L = \bar{f} - w \]

\[ U = (1+\bar{a})\,(\bar{w}_{\min} - w^*) \quad \text{if } \bar{w}_{\min} > w^* \]

where \(\bar{w}_{\min}\) is the minimum wage, \(w^* = 10\) the market wage, and \(\bar{a} = 2\), \(\bar{\ell} = 30\) and \(\bar{f} = 60\) are held fixed.

Takeaway. You only choose the inputs; the model’s equations work out the wage, employment and unemployment. A minimum wage at or below the market wage \(w^*\) changes nothing. Above it, the wage equals the floor, and each extra dollar cuts employment by one hour and raises unemployment by \(1 + \bar{a} = 3\) hours.

Source. Adapted from Fig. 1.6 in Jones (2024), Macroeconomics, 6th ed.

Solving a model: the labor market

Fig. 8: The labor market

Move the slider to change labor demand at a zero wage; the dashed gray lines are the textbook’s curves, and the title reads the new equilibrium.

\[ L^s = \bar{a}\,w + \bar{\ell}, \qquad L^d = \bar{f} - w \]

\[ w^* = \frac{\bar{f} - \bar{\ell}}{1 + \bar{a}}, \qquad L^* = \frac{\bar{a}\bar{f} + \bar{\ell}}{1 + \bar{a}} \]

where \(\bar{f}\) is the hours firms would hire at a zero wage, with \(\bar{a} = 2\) and \(\bar{\ell} = 30\) held fixed.

Takeaway. A higher \(\bar{f}\) shifts labor demand to the right along an unchanged supply curve, so the wage and employment both rise; a lower one shifts it to the left and both fall, and at 60 nothing changes. The shift is shared: the wage takes the share \(1/(1+\bar{a})\), one third, and employment the other two thirds.

Source. Adapted from Fig. 1.8 in Jones (2024), Macroeconomics, 6th ed.