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In financial economics, the no-trade theorem states that if markets are in a state of efficient equilibrium; there are no noise traders or other non-rational interferences with prices; the structure by which traders or potential traders acquire information is itself common knowledge
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 ...
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.
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.
With lower barriers, new firms can enter the market again, making the long run equilibrium more like that of a competitive industry, with no economic profit for firms. In a regulated industry, the government examines firms' marginal cost structure and allows them to charge a price that is no greater than this marginal cost.
He states that a contestable market will never have an economic profit greater than zero when in equilibrium and the equilibrium will also be efficient. According to Baumol, this equilibrium emerges endogenously due to the nature of contestable markets; that is, the only industry structure that survives in the long run is the one which ...
New Trade Theory analyses individual enterprises and plants in an international competitive situation. The classical trade theory—i.e., the Heckscher–Ohlin model—has no enterprises in mind. The new trade theory treats enterprises in an industry as identical entities. "New" New Trade Theory (NNTT) gives focus on the diversity of enterprises.
The transition from the short-run to the long-run may be done by considering some short-run equilibrium that is also a long-run equilibrium as to supply and demand, then comparing that state against a new short-run and long-run equilibrium state from a change that disturbs equilibrium, say in the sales-tax rate, tracing out the short-run ...