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Monday, 5 March 2012

DIFFERENCES BETWEEN STATIC AND DYNAMIC ANALYSIS

            The main differences between static and dynamic analysis are:-
1.Time element:- In static economic analysis time element has nothing to do.In static economics,all economic variables refer to the same point of time.Static economy is alsocalled a timeless economy.Static economy,according to Hicks,is one where we do not trouble about dating.On the contrary,in dynamic economics,time element occupies an important role.
2. Process of change:- Another difference between static economics and dynamic economics is that static analysis does not show the path of change.It only tells about the conditions of equlibrium.On the contrary,dynamic economic analysis also shows the path of change.Static economics is called a 'still picture' whereas the dynamic economics is called a 'movie'.
3. Equilibrium:- Static economics studies only a particular point of equlibrium.But dynamic economics also studies the process by which equilibrium is acheived.As a result,there may be equilibrium or may be disequilbrium.Therefore,static analysis is a study of only equlibrium whereas dynamic analysis studies both equilibrium and disequilibrium.
4.Study of reality:- Static analysis is far from reality while dynamic analysis is nearer to reality.Static analysis is based on the unrealistic assumptions of perfect competition,perfect knowledge,etc.Here all the important economic variables like fashions,population,models of production,etc are assumed to be constant.On the contrary,dynamic analysis takes these economic variables as changeable.

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