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However, many see the concept of flexible prices as useful in the long-run analysis since prices are not stuck forever: market-clearing models describe the equilibrium economy gravitates towards. Therefore, many macro-economists feel that price flexibility is a reasonable assumption for studying long-run issues, such as growth in real GDP ...
In economics, general equilibrium theory attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the interaction of demand and supply will result in an overall general equilibrium.
In economics, economic equilibrium is a situation in which the economic forces of supply and demand are balanced, meaning that economic variables will no longer change. [ 1 ] Market equilibrium in this case is a condition where a market price is established through competition such that the amount of goods or services sought by buyers is equal ...
The implicit assumption is that the study of a one agent economy will provide useful insights into the functioning of a real world economy with many economic agents. This article pertains to the study of consumer behaviour, producer behaviour and equilibrium as a part of microeconomics. In other fields of economics, the Robinson Crusoe economy ...
Walras's law is a consequence of finite budgets. If a consumer spends more on good A then they must spend and therefore demand less of good B, reducing B's price. The sum of the values of excess demands across all markets must equal zero, whether or not the economy is in a general equilibrium.
Market definition is an important issue for regulators facing changes in market structure, which needs to be determined. [1] The relationship between buyers and sellers as the main body of the market includes three situations: the relationship between sellers (enterprises and enterprises), the relationship between buyers (enterprises or ...
where the economic meanings of and are the equilibrium prices of various goods and the equilibrium activity levels of various economic agents, respectively. We can further extend the von Neumann general equilibrium model to the following structural equilibrium model with A {\displaystyle \mathbf {A} } and B {\displaystyle \mathbf {B} } as ...
Economic liberals and libertarian capitalists also argue that monopolies and big business are not generally the result of a free market, or that they never arise from a free market; rather, they say that such concentration is enabled by governmental grants of franchises or privileges.