COMPARATIVE STATICS

The method of comparative statics i~ it sort of cross between statics and dynamics. It occupies a position in between the two. We know that the dynamic analysis includes the time interval whereas the static analysis dues not. Everything in the real world is subject to change with time. Notwithstanding this, static analysis remains useful. for this is a method whereby we can  ignore time as a variable and Mill make a purposeful study of the economic system. This is possible when  we’ are finding out the ultimate effect  a certain initial change and ignore the process through which it is brought about.

We can thus think of an analysis in which we start with a system in equilibrium, then introduce a change and study the ultimate effect of the change. This is the method of comparative statics. Here. we have in a way done away with the time element-we  have ignored that time is changing. Wc just jump from one equilibrium position to another without taking care of as to what happens in between the two situations. We call such a method as comparative statics because in it we compare one cquilihrrum position with another and ignore the time clement comparative static treatment provides some important insights into the mechanism of the exchange economy.