Economic theories

The concept of the interest rate used by economists is the same as the one commonly used.

Important economic theories and their founders

One of these circumstances refers to an oligopoly in which there are asymmetric reactions from rivals when a particular firm formulates policies—if a certain oligopolistic firm cuts price, it is met with price reductions by competing firms; if it raises the price of its product, however, rivals do not match the price increase. Keynes theorized that natural inefficiencies in the market will see goods that are not met with demand. For example, Kahneman and Tversky observed that we will expend more effort to save a few dollars on a small purchase than to save the same amount on a large purchase. That is to say that monetarism seems to assume an objective value of capital in an economy, and the subsequent implications on the supply and demand. Their award-winning prospect theory shows how people really make decisions in uncertain situations. Deep examination of the world of business affairs led Smith to the conclusion that collectively the individuals in society, each acting in his or her own self-interest, manage to produce and purchase the goods and services that they as a society require. There are many factors that give rise to a monopoly. This is a sensible criticism in many ways, as the fundamental idea behind this economic theory is that it is driven by individuals and individuals are not always rational indeed, they are quite often irrational. As a result, the price associated with the product at the equilibrium or profit-maximizing output is higher than the marginal cost which equals marginal revenue.

First, the price of the product determines how much of the product the consumer buys, given that all other factors remain unchanged. In general, the lower the price of the product the more a consumer buys. This would theoretically provide some control over aggregate demand which is one of the primary areas of disagreement between Keynesian and classical economists.

list of economic theories and their founders

Buchanan lays out his award-winning theory in a book he coauthored with Gordon Tullock in"The Calculus of Consent: Logical Foundations of Constitutional Democracy. This is particularly true of the U. An industry characterized by a monopolistic market structure produces less output and charges higher prices than under perfect competition and presumably under monopolistic competition.

Nevertheless, the idea of competition is very deeply ingrained in the society. Karl Marx: It's Exploitation!

purpose of economic theory

The employment level is often quoted in terms of the unemployment rate. The GDP is a measure of all currently produced goods and services valued at market prices.

Do not worry.

Rated 7/10 based on 110 review
Category:Economic theories