Business, Legal & Accounting Glossary
Exogenous is a change produced or caused by factors external to the economic model and come from outside the model. Exogenous change is unexplained by the model. Examples of exogenous may be cited in the demand and supply model where variations in consumer preferences and tastes cannot be explained by the economic model. Alternatively, exogenous changes are those that involve a change in an independent variable. This variable is completely unaffected by an economic model.
It is an independent variable that can affect a model but is not affected by it. Exogenous variable’s generation method and qualitative characteristics cannot be specified by builder of economic model. Usage includes setting up of arbitrary external conditions. Examples of exogenous variable include the expenditure of governments relating to income theory determination.
It is a dependent variable formed inside a model. An endogenous variable is one whose value is determined by one of the functional relationships found in that specific model. Examples include income and consumption expenditure that are regarded as endogenous to the determination of income economic models.
It is a theoretical construct that represents different processes in economics by a variables set and quantitative and/or logical relationships between members of the set. This model is made to explain complex economic processes-without compulsory usage of mathematics. Most economic models employ structural parameters. A single economic model may comprise several parameters. These parameters may vary to create a number of properties.
It is a model to ascertain a stock’s intrinsic value. Calculation of value according to the Gordon growth model is dependent on a future series of dividends that mature at a constant rate. If a dividend per share is payable in a year, and the premise that dividend increases at a constant rate in eternity, Gordon growth model figures out the present value of an infinite series of dividends in future. Gordon growth model is expressed mathematically as Stock value (P)= D / (k – G)
where D= anticipated dividend per share one year in future k= Equity investor’s required rate of return G= Dividends growth rate in perpetuity
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This glossary post was last updated: 29th March, 2020 | 0 Views.