In economics and general equilibrium theory, a perfect market is defined by several conditions, collectively called perfect competition. Perfect information – All consumers and producers know all prices of products, homogeneous products – The products are perfect substitutes for each other. Well defined Property rights – These determine what may be sold, profit maximization of sellers – Firms sell where the most profit is generated, where marginal costs meet marginal revenue. Rational buyers, Buyers make all trades that increase their economic utility, No externalities – Costs or benefits of an activity do not affect third parties. This criteria excludes any government intervention, zero transaction costs – Buyers and sellers do not incur costs in making an exchange of goods in a perfectly competitive market. Non-increasing returns to scale and no network effects – The lack of economies of scale or network effects ensures that there always be a sufficient number of firms in the industry. This equilibrium will be a Pareto optimum, meaning that nobody can be better off by exchange without making someone else worse off.
Such markets are efficient, as output will always occur where marginal cost is equal to marginal revenue. But perfectly competitive markets are not necessarily productively efficient as output will not always occur where marginal cost is equal to average cost, in perfect competition, any profit-maximizing producer faces a market price equal to its marginal cost. This implies that a factors price equals the marginal revenue product. It allows for derivation of the curve on which the neoclassical approach is based. This is the reason why a monopoly does not have a supply curve, the abandonment of price taking creates considerable difficulties for the demonstration of a general equilibrium except under other, very specific conditions such as that of monopolistic competition. Real markets are never perfect, but range from close-to-perfect to very imperfect and foreign exchange markets are commonly said to be the most similar to the perfect market. The real estate market is an example of an imperfect market.
In a perfect market the sellers operate at zero economic surplus, normal profit is a component of costs and not a component of business profit at all. It represents the opportunity cost, as the time that the owner spends running the firm could be spent on running a different firm. In other words, the cost of normal profit varies both within and across industries, it is commensurate with the associated with each type of investment. Only normal profits arise in circumstances of perfect competition when long run equilibrium is reached
Development economics is a branch of economics which deals with economic aspects of the development process in low-income countries. Development economics involves the creation of theories and methods that aid in the determination of policies and practices, unlike in many other fields of economics, approaches in development economics may incorporate social and political factors to devise particular plans. Also unlike many other fields of economics, there is no consensus on what students should know, different approaches may consider the factors that contribute to economic convergence or non-convergence across households and countries. The earliest Western theory of development economics was mercantilism, which developed in the 17th century, earlier theories had given little attention to development. For example, Scholasticism the dominant school of thought during medieval feudalism, emphasized reconciliation with Christian theology and ethics, the 16th- and 17th-century School of Salamanca, credited as the earliest modern school of economics, likewise did not address development specifically.
Mercantilism held that a nations prosperity depended on its supply of capital and it emphasised the maintenance of a high positive trade balance as a means of accumulating this bullion. To achieve a trade balance, protectionist measures such as tariffs. Mercantilist development theory advocated colonialism, in France, mercantilist policy is most associated with 17th-century finance minister Jean-Baptiste Colbert, whose policies proved influential in American development. Mercantilist ideas continue in the theories of nationalism and neomercantilism. A significant difference from mercantilism was the de-emphasis on colonies, in favor of a focus on domestic production, the names most associated with 19th-century economic nationalism are the American Alexander Hamilton, the German-American Friedrich List, and the American Henry Clay. Hamiltons 1791 Report on Manufactures, his opus, is the founding text of the American System. The key authors are Paul Rosenstein-Rodan, Kurt Mandelbaum, Ragnar Nurkse, only after the war did economists turn their concerns towards Asia and Latin America.
At the heart of these studies, by such as Simon Kuznets and W. Arthur Lewis was an analysis of not only economic growth. The linear-stages-of-growth model posits that there are a series of five stages of development which all countries must go through during the process of development. Such theories have been criticized for not recognizing that, while necessary and that is to say that this early and simplistic theory failed to account for political and institutional obstacles to development. Furthermore, this theory was developed in the years of the Cold War and was largely derived from the successes of the Marshall Plan. This has led to the criticism that the theory assumes that the conditions found in developing countries are the same as those found in post-WWII Europe. There are two forms of structural-change theory, W
In economics, economic equilibrium is a state where economic forces such as supply and demand are balanced and in the absence of external influences the values of economic variables will not change. For example, in the textbook model of perfect competition, equilibrium occurs at the point at which quantity demanded. However, the concept of equilibrium in economics applies to imperfectly competitive markets, three basic properties of equilibrium in general have been proposed by Huw Dixon. These are, Equilibrium property P1, The behavior of agents is consistent, Equilibrium property P2, No agent has an incentive to change its behavior. Equilibrium Property P3, Equilibrium is the outcome of some dynamic process, in a competitive equilibrium, supply equals demand. Property P1 is satisfied, because at the price the amount supplied is equal to the amount demanded. Demand is chosen to maximize utility given the price, no one on the demand side has any incentive to demand more or less at the prevailing price.
Likewise supply is determined by firms maximizing their profits at the market price, agents on neither the demand side nor the supply side will have any incentive to alter their actions. To see whether Property P3 is satisfied, consider what happens when the price is above the equilibrium, in this case there is an excess supply, with the quantity supplied exceeding that demanded. This will tend to put pressure on the price to make it return to equilibrium. Likewise where the price is below the point there is a shortage in supply leading to an increase in prices back to equilibrium. Not all equilibria are stable in the sense of Equilibrium property P3 and it is possible to have competitive equilibria that are unstable. However, if an equilibrium is unstable, it raises the question of how you might get there, even if it satisfies properties P1 and P2, the absence of P3 means that the market can only be in the unstable equilibrium if it starts off there. In most simple microeconomic stories of supply and demand a static equilibrium is observed in a market, Equilibrium may be economy-wide or general, as opposed to the partial equilibrium of a single market.
Equilibrium can change if there is a change in demand or supply conditions, for example, an increase in supply will disrupt the equilibrium, leading to lower prices. Eventually, a new equilibrium will be attained in most markets, there will be no change in price or the amount of output bought and sold — until there is an exogenous shift in supply or demand. That is, there are no endogenous forces leading to the price or the quantity, the Nash equilibrium is widely used in economics as the main alternative to competitive equilibrium. It is used there is a strategic element to the behavior of agents
Agricultural productivity is measured as the ratio of agricultural outputs to agricultural inputs. While individual products are measured by weight, their varying densities make measuring overall agricultural output difficult. Therefore, output is measured as the market value of final output. This output value may be compared to different types of inputs such as labour. These are called partial measures of productivity, agricultural productivity may be measured by what is termed total factor productivity. This method of calculating agricultural productivity compares an index of agricultural inputs to an index of outputs, changes in TFP are usually attributed to technological improvements.4.1, Agriculture, Section 2.6, Scientific agriculture. The productivity of a regions farms is important for many reasons, an increase in a regions agricultural productivity implies a more efficient distribution of scarce resources. As farms become more productive, the wages earned by those who work in agriculture increase, at the same time, food prices decrease and food supplies become more stable.
Labourers therefore have more money to spend on food as well as other products and this leads to agricultural growth. People see that there is an opportunity to earn their living by farming and are attracted to agriculture either as owners of farms themselves or as labourers. However, it is not only the people employed in agriculture who benefit from increases in agricultural productivity and those employed in other sectors enjoy lower food prices and a more stable food supply. Agricultural productivity is becoming important as the world population continues to grow. India, one of the worlds most populous countries, has taken steps in the past decades to increase its land productivity. Forty years ago, North India produced only wheat, but with the advent of the earlier maturing high-yielding wheats and rices and this wheat/rice combination is now widely used throughout the Punjab and parts of Uttar Pradesh. The wheat yield of three tons and rice yield of two tons combine for five tons of grain per hectare, helping to feed Indias 1.1 billion people, increase in agricultural productivity is often linked with questions about sustainability and sustainable development.
Changes in agricultural practices necessarily bring changes in demands on resources, between 1950 and 2000, during the so-called second agricultural revolution of modern times, U. S. agricultural productivity rose fast, especially due to the development of new technologies. For many farmers agricultural productivity may mean much more, a productive farm is one that provides most of the resources necessary for the farmers family to live, such as food, fiber, healing plants, etc. It is a farm which ensures food security as well as a way to sustain the well-being of a community and this implies that a productive farm is one which is able to ensure proper management of natural resources, such as biodiversity, water, etc
The American Economic Review
The American Economic Review is a peer-reviewed academic journal of economics. Twelve issues are published annually by the American Economic Association, first published in 1911, it is considered one of the most prestigious and highly distinguished journals in the field of economics. The current editor-in-chief is Esther Duflo, the previous editor was Pinelopi Goldberg. The journal is based in Pittsburgh, the May issue of the American Economic Review each year is known as Papers and Proceedings. Selected papers and discussions of papers presented at the Annual Meetings of the American Economic Association are published along with reports of officers and representatives. In 2004, the American Economic Review began requiring data and code sufficient to permit replication of a papers results, exceptions are made for proprietary data. The Use of Knowledge in Society, by F. A. Hayek Economic Growth and Income Inequality, the Cost of Capital, Corporation Finance and the Theory of Investment, by Franco Modigliani and Merton Miller.
A Theory of Optimum Currency Areas, by Robert Mundell and the Welfare Economics of Medical Care, by Kenneth Arrow. Capital Theory and Investment Behavior, by Dale W. Jorgenson National Debt in a Neoclassical Growth Model, the Role of Monetary Policy, by Milton Friedman. Migration and Development, A Two-Sector Analysis, by John R. Harris, Optimal Taxation and Public Production I, Production Efficiency and Optimal Taxation and Public Production II, Tax Rules, by Peter A. Production, Information Costs, and Economic Organization, by Armen Alchian, some International Evidence on Output-Inflation Tradeoffs, by Robert Lucas, Jr. The Economic Theory of Agency, The Principal’s Problem, by Stephen A. Ross, the Political Economy of the Rent-Seeking Society, by Anne Osborn Krueger Monopolistic Competition and Optimum Product Diversity, by Avinash Dixit and Joseph Stiglitz. An Almost Ideal Demand System, by Angus Deaton and John Muellbauer, on the Impossibility of Informationally Efficient Markets, by Sanford J.
Grossman and Joseph E. Stiglitz. Scale Economies, Product Differentiation, and the Pattern of Trade, do Stock Prices Move Too Much to Be Justified by Subsequent Changes in Dividends. Thirteen of those authors have received the Nobel Prize in Economic Sciences, the journal can be accessed online via JSTOR. In both 2006 and 2007, it was the most widely viewed journal of all the 775 journals in JSTOR, other notable papers from the journal include, Colonial origins of comparative development, by Daron Acemoglu, Simon Johnson, and James A. Robinson. Growth in a Time of Debt, by Carmen Reinhart and Kenneth Rogoff, official website 1911-1922 volumes available online at the Online Books Page
Migration in China
Internal migration in the Peoples Republic of China is one of the most extensive in the world according to the International Labour Organization. In fact, research done by Kam Wing Chan of the University of Washington suggests that In the 30 years since 1979, of the 440 million increase, about 340 million was attributable to net migration and urban reclassification. Even if only half of that increase was migration, the volume of migration in such a short period is likely the largest in human history. Migrants in China are commonly members of a population, which refers primarily to migrants in China without local household registration status through the Chinese Hukou system. In general, rural-urban migrant workers are most excluded from local resources, citywide social welfare programs. Migrant workers are not necessarily rural workers, they can simply be people living in areas with rural household registration. In 2015 a total of 277.5 million migrant workers existed in China, out of these, migrant workers who left their hometown and worked in other provinces accounted for 158.63 million and migrant workers who worked within their home provinces reached 94.15 million.
The balance of gender for migrant workers was two-thirds male to female in 2015. Estimations are that Chinese cities will face an influx of another 243 million migrants by 2025 and this population of migrants would represent almost 40 percent of the total urban population, a number which is almost three times the current level. While it is difficult to collect accurate statistical data on migrant floating populations. In Chinas largest cities, for instance, it is quoted that at least one out of every five persons is a migrant. The other factors influencing migration of people from rural areas to large cities are employment, business opportunities. In 1668 during the reign of the Kangxi Emperor, the Qing government decreed a prohibition of non-Eight Banner people getting into Northeast China Manchuria of their origin. Han Chinese were banned from settling in this region but the rule was openly violated, Han Chinese farmers were resettled from north China by the Qing to the area along the Liao River in order to restore the land to cultivation.
Wasteland was reclaimed by Han Chinese squatters in addition to other Han who rented land from Manchu landlords, the Qianlong Emperor allowed Han Chinese peasants suffering from drought to move into Manchuria despite him issuing edicts in favor of banning them from 1740-1776. Chinese tenant farmers rented or even claimed title to land from the imperial estates, Han Chinese were officially forbidden to settle in Inner and Outer Mongolia. Mongols were forbidden from crossing into the Han Chinese 18 provinces without permission and were given if they did. Mongols were forbidden from crossing into another Mongol leagues, Han Chinese settlers violated the rule and crossed into and settled in Inner Mongolia
Welfare economics is a branch of economics that uses microeconomic techniques to evaluate well-being at the aggregate level. The field of economics is associated with two fundamental theorems. The first states that certain assumptions, competitive markets produce efficient outcomes. The second states that given further restrictions, any Pareto efficient outcome can be supported as a market equilibrium. Thus a social planner could use a social function to pick the most equitable efficient outcome. Because of welfare economics close ties to social theory, Arrows impossibility theorem is sometimes listed as a third fundamental theorem. Attempting to apply the principles of welfare economics gives rise to the field of public economics, the early Neoclassical approach was developed by Edgeworth, Sidgwick and Pigou. It assumes the following, Utility is cardinal, that is, preferences are exogenously given and stable. Additional consumption provides smaller and smaller increases in utility, all individuals have interpersonally commensurable utility functions.
With these assumptions, it is possible to construct a social welfare function simply by summing all the utility functions. Note that such a measure would still be concerned with the distribution of income, in normative terms, such authors were writing in the Benthamite tradition. The New Welfare Economics approach is based on the work of Pareto, Hicks and it explicitly recognizes the differences between the efficiency aspect of the discipline and the distribution aspect and treats them differently. Further, efficiency dispenses with cardinal measures of utility, replacing it with ordinal utility, situations are considered to have distributive efficiency when goods are distributed to the people who can gain the most utility from them. Many economists use Pareto efficiency as their efficiency goal, according to this measure of social welfare, a situation is optimal only if no individuals can be made better off without making someone else worse off. This ideal state of affairs can only come about if four criteria are met and this occurs when no consumer can be made better off without making others worse off.
The marginal rate of transformation in production is identical for all products and this occurs when it is impossible to increase the production of any good without reducing the production of other goods. The marginal resource cost is equal to the marginal product for all production processes. This takes place when marginal physical product of a factor must be the same for all firms producing a good, the marginal rates of substitution in consumption are equal to the marginal rates of transformation in production, such as where production processes must match consumer wants
JSTOR is a digital library founded in 1995. Originally containing digitized back issues of journals, it now includes books and primary sources. It provides full-text searches of almost 2,000 journals, more than 8,000 institutions in more than 160 countries have access to JSTOR, most access is by subscription, but some older public domain content is freely available to anyone. William G. Bowen, president of Princeton University from 1972 to 1988, JSTOR originally was conceived as a solution to one of the problems faced by libraries, especially research and university libraries, due to the increasing number of academic journals in existence. Most libraries found it prohibitively expensive in terms of cost and space to maintain a collection of journals. By digitizing many journal titles, JSTOR allowed libraries to outsource the storage of journals with the confidence that they would remain available long-term, online access and full-text search ability improved access dramatically. Bowen initially considered using CD-ROMs for distribution, JSTOR was initiated in 1995 at seven different library sites, and originally encompassed ten economics and history journals. JSTOR access improved based on feedback from its sites.
Special software was put in place to make pictures and graphs clear, with the success of this limited project and Kevin Guthrie, then-president of JSTOR, wanted to expand the number of participating journals. They met with representatives of the Royal Society of London and an agreement was made to digitize the Philosophical Transactions of the Royal Society dating from its beginning in 1665, the work of adding these volumes to JSTOR was completed by December 2000. The Andrew W. Mellon Foundation funded JSTOR initially, until January 2009 JSTOR operated as an independent, self-sustaining nonprofit organization with offices in New York City and in Ann Arbor, Michigan. JSTOR content is provided by more than 900 publishers, the database contains more than 1,900 journal titles, in more than 50 disciplines. Each object is identified by an integer value, starting at 1. In addition to the site, the JSTOR labs group operates an open service that allows access to the contents of the archives for the purposes of corpus analysis at its Data for Research service.
This site offers a facility with graphical indication of the article coverage. Users may create focused sets of articles and request a dataset containing word and n-gram frequencies and they are notified when the dataset is ready and may download it in either XML or CSV formats. The service does not offer full-text, although academics may request that from JSTOR, JSTOR Plant Science is available in addition to the main site. The materials on JSTOR Plant Science are contributed through the Global Plants Initiative and are only to JSTOR
Note that the quantity Y of the product is typically defined ignoring external costs and benefits. Suppose a firms output Y is given by the production function, labor is the variable input and capital is the fixed input. As more and more of variable input is employed, marginal product starts to fall, after a certain point, the marginal product becomes negative, implying that the additional unit of labor has decreased the output, rather than increasing it. The reason behind this is the marginal productivity of labor. The marginal product of labor is the slope of the total product curve, in the neoclassical theory of competitive markets, the marginal product of labor equals the real wage. Relationship of Marginal Product with the Total Product The relationship can be explained in three phases- Initially, as the quantity of variable input is increased, TPP rises at an increasing rate, in this phase, MPP rises. As more and more quantities of the inputs are employed. In this phase, MPP starts to fall, when the TPP reaches its maximum, MPP is zero.
Beyond this point, TPP starts to fall and MPP becomes negative, Marginal product of labor Marginal product of capital Marginal revenue productivity theory of wages Production theory Beck, Bernhard. Classical Economics, An Austrian Perspective on the History of Economic Thought Volume II, Alabama, Ludwig von Mises Institute
During periods of recession, an economy usually experiences a relatively high unemployment rate. According to International Labour Organization report, more than 200 million people globally or 6% of the workforce were without a job in 2012. There remains considerable debate regarding the causes and solutions for unemployment. Classical economics, new classical economics, and the Austrian School of economics argue that market mechanisms are reliable means of resolving unemployment, Keynesian economics emphasizes the cyclical nature of unemployment and recommends government interventions in the economy that it claims will reduce unemployment during recessions. This theory focuses on recurrent shocks that suddenly reduce aggregate demand for goods and services, Keynesian models recommend government interventions designed to increase demand for workers, these can include financial stimuli, publicly funded job creation, and expansionist monetary policies. Structural arguments emphasize causes and solutions related to disruptive technologies and globalization and solutions for frictional unemployment often address job entry threshold and wage rates.
Behavioral economists highlight individual biases in decision making, and often involve problems and solutions concerning sticky wages, for centuries, experts have predicted that machines would make workers obsolete and increase unemployment. The state of being without any work both for an educated & uneducated person, for earning ones livelihood is meant by unemployment, some additional types of unemployment that are occasionally mentioned are seasonal unemployment, hardcore unemployment, and hidden unemployment. Though there have been several definitions of voluntary and involuntary unemployment in the economics literature, voluntary unemployment is attributed to the individuals decisions, whereas involuntary unemployment exists because of the socio-economic environment in which individuals operate. In these terms, much or most of frictional unemployment is voluntary, on the other hand, cyclical unemployment, structural unemployment, and classical unemployment are largely involuntary in nature.
So, in practice, the distinction between voluntary and involuntary unemployment is hard to draw and this happens with cyclical unemployment, as macroeconomic forces cause microeconomic unemployment which can boomerang back and exacerbate these macroeconomic forces. Classical, or real-wage unemployment, occurs when real wages for a job are set above the market-clearing level causing the number of job-seekers to exceed the number of vacancies. On the other hand, some argue that as wages fall below a livable wage many choose to drop out of the labor market. This is especially true in countries where low-income families are supported through public welfare systems, in such cases, wages would have to be high enough to motivate people to choose employment over what they receive through public welfare. Wages below a livable wage are likely to result in lower labor market participation in above stated scenario, in addition it must be noted that consumption of goods and services is the primary driver of increased need for labor.
Higher wages leads to workers having more available to consume goods. Therefore, higher wages increase general consumption and as a result need for labor increases, many economists have argued that unemployment increases with increased governmental regulation. For example, minimum wage laws raise the cost of some low-skill laborers above market equilibrium, laws restricting layoffs may make businesses less likely to hire in the first place, as hiring becomes more risky
Human migration is the movement by people from one place to another with the intentions of settling, permanently in the new location. The movement is often long distances and from one country to another, but internal migration is possible, indeed. Migration may be individuals, family units or in large groups, nomadic movements are normally not regarded as migrations as there is no intention to settle in the new place and because the movement is generally seasonal. Only a few people have retained this form of lifestyle in modern times. Many estimates of statistics in worldwide migration patterns exist, the World Bank has published its Migration and Remittances Factbook annually since 2008. The International Organisation for Migration has published a yearly World Migration Report since 1999, the United Nations Statistics Division keeps a database on worldwide migration. Recent advances in research on migration via the Internet promise better understanding of migration patterns, substantial internal migration can take place within a country, either seasonal human migration, or shifts of population into cities or out of cities.
Studies of worldwide migration patterns, tend to limit their scope to international migration, the World Banks Migration and Remittances Factbook of 2011 lists the following estimates for the year 2010, total number of immigrants,215.8 million or 3. 2% of world population. In 2013, the percentage of international migrants worldwide increased by 33% with 59% of migrants targeting developed regions, almost half of these migrants are women, which is one of the most significant migrant-pattern changes in the last half century. Women migrate alone or with their members and community. Even though female migration is largely viewed as rather than independent migration, emerging studies argue complex. The World Banks report estimates that, as of 2010,16.3 million or 7. 6% of migrants qualified as refugees. At the end of 2012, approximately 15.4 million people were refugees, there is substantial South-South and North-North migration, i. e. most emigrants from high-income O. E. C. D. Countries migrate to other countries, and a substantial part of emigrants from developing countries migrate to other developing countries.
Between 2000 and 2013 the average rate of change of the migrant population in the developing regions slightly exceeded that of the developed regions. Remittances, i. e. funds transferred by migrant workers to their home country, the top ten remittance recipients in 2010 were 1. China, Philippines, Germany, Belgium, the Global Commission on International Migration, launched in 2003, published a report in 2005. International migration challenges at the level are addressed through the Global Forum on Migration and Development