123ArticleOnline Logo
Welcome to 123ArticleOnline.com!

ALL >> Business >> View Article

A General Equilibrium Of All Markets

By Author: peter
Total Articles: 191

Having stated the fundamental proposition about competitive markets, we will explore the reasons behind this remarkable result. Let's review the behavior of individual markets first:

• Competitive supply and demand operate to determine prices and quantities in individual markets.

• Market demand curves are derived from the marginal utilities of different goods.
• The marginal costs of different commodities lie behind their competitive supply curves.

• Firms calculate marginal costs of products and marginal revenue products of factors IWC Replica and then choose inputs and outputs so as to maximize profits.

• These marginal revenue products, summed for all firms, provide the derived demands for the factors of production.

• These derived demands for land, labor, or capital goods interact with their market supplies to determine factor prices such as rent, wages, and interest rates.

• The factor prices and quantities determine incomes, which then close the circle back to Steps 1 and 2 by helping to determine the demand for different commodities.

All these statements are the result of partial equilibrium analysis, which involves the behavior of a single market, household, or firm, taking the behavior of all other markets and the rest of the economy as given. In this unit, we are concerned with general-equilibrium analysis, which examines how (and how successfully) all the households, firms, and markets interact simultaneously to solve the questions of how, what, and for whom.It is the interconnectedness of economic life that makes it so intricate and complex. How was it that a revolution in Iran in 1979 led to a worldwide oil price increase, lowering the demand for automobiles and causing thousands of steelworkers to lose their jobs? How did the reunification of Germany in 1990 lead to higher interest rates in Germany, thereby producing stagnation in the rest of Europe, and then to a currency crisis and a breakdown of the European Monetary System? These and countless other economic impacts take place through the general equilibrium interactions of the seven steps outlined above.

Notice how our list of steps follows a logical progression from step to step. But in real life, which comes first? Is there an orderly sequence that determines prices in single markets on Monday, evaluates consumer preferences on Tuesday, and reckons business costs on Wednesday and marginal products on Thursday? Obviously not. All these Omega Replica partial-equilibrium processes are going on simultaneously.

That is not all. These different activities do not go on independently, each in its own little groove, careful not to get in the way of the others. All the processes of supply and demand, of cost and preference, of factor productivity and demand are really different aspects of one vast, simultaneous, interdependent process.

Thus we see a logical structure behind the millions of markets determining prices and outputs: (1) Households, which want to maximize their satisfactions, supply factors and buy products while (2) firms, guided by the lure of profits, transform factors bought from households into products sold to households. The logical structure of a general equilibrium system is complete.

Total Views: 94Word Count: 496See All articles From Author

Business Articles

1. Are You Looking For Instant Setup Of Hushmail Account On Iphone?
Author: mobilesupportplus

2. Industrial Portable Fans Are Designed To Keep The Work Place Safe!
Author: Mark Pingler

3. Business Coaching As A Valuable Asset For You And Your Business
Author: Ian Marsh

4. How To Make Gst Tax Invoice? Which Gst Software One Should Use?
Author: Sagar Gore

5. Easy Guide To Get The Best Custom Optical Filters
Author: Lee wood

6. Movers Services In Dubai‎, Movers And Packers Company In Dubai, Moving And Shifting Company In Dubai
Author: trukkeronline

7. Web Design And Seo Service Company
Author: bestseoserviceprovidercompany

8. Fast & Reliable Onsite Computer Services
Author: techcomputersolutionsindia

9. Coated Fabrics Market Size To Grow Over $22.57 Billion By 2020
Author: Gomez R

10. Carpet Cleaning And Upholstery Cleaning
Author: drcarpetranchosantamargarita

11. Carpet Cleaning Services In Sherman Oaks
Author: carpetcleaninglamain

12. Cheap Carpet Steam Cleaning
Author: drcarpetsantaana

13. The Provision Of These Loans Empowers You To Take Out Quick Cash
Author: Jack martin

14. Bearings Market Size Projected To Grow Over $110 Million By 2024
Author: Gomez R

15. Free Classifieds India
Author: JivanchiTechnology

Login To Account
Login Email:
Password:
Forgot Password?
New User?
Sign Up Newsletter
Email Address: