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Mathematically, most neoclassical models assume that the profits are concave. This guaranties the uniqueness of the maximum. In economic terms, the Neoclassical theory usually assumes that the law of diminishing returns holds. Thus, the more you hire workers, the more you produce, but at a diminishing rate. I am not so sure what your professor has in mind ...


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The simplest method would be to watch how quickly your inventory is depleted. If your baseline is that you sell 1000 widgets a day at a dollar per widget and suddenly you're selling 1250 widgets a day (or selling out of the 1000 widgets your factory can produce a day by early afternoon), it is reasonable to believe that the demand curve has shifted to the ...


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Profit, wage and rent are rewards for inputs used in production, they constitute a decomposition of Income (or the Income-decomposition of output produced) Inheritance is a transfer, it does not involve production. So it is invalid to try to fit it into the mentioned classification. Consider now any gift: say I work, earn a wage in the form of consumer ...


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A classic reference that is somewhat related is Ronald Coase's "The Nature of the Firm". Coase set out to address the following puzzle: since markets are efficient, why do we need to organize into firms? Couldn't we just have each individual acting alone and rely on the market to put the pieces together into complete products? Coases answer to why this ...


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If you enjoy ethical and philosophical aspects, you should look into international aid and intervention. Check out "Adaptive Preferences and Women's Empowerment" by Khader and work by Nussbaum in regards to social justice. These are some great texts coming off of reading Hayek. If you aren't familiar with the concept of adaptive preferences, it is the idea ...


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Conteporary Marxist economist Richard D Wolff says on the issue (abridged): The labor theory of value is not a theory is not a theory of prices. The prices of things is determined based on whats going on among the people buying and whats going on among those selling. Marx was not so silly...Notice this is not called the labor theory of price, so we need ...


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I am not familiar with contemporary Marxist economists, but the labour theory of value as formulated in Das Kapital does not deny that the usefulness (use value, in Marx' terms) of an item is subjective. Moreover, the fact that an item is useful to someone (however this usefulness is determined by each individual subject) is a precondition for it to be ...


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To begin with, economics is all about assumptions. Because of classical dichotomy, money level doesn't impact the growth of an economy in the long run. Money has no effect on GDP in classical macroeconomics. If you want to model the effect of money, you have to introduce nominal rigidities in your model. That means, at least the goods market or the labour ...


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The broad definition I use is this: A resource is anything that's used to produce goods. (I treat the terms resource, factor of production, means of production, and input as interchangeable.) I neatly divide all resources into three categories: So, labor refers to human beings (or more correctly, the services thereof). Examples: (the services of) a ...


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What I think you want to consider to be grouped with land, labour and capital is another factor to be considered with labor- technology (A.K.A "Knowledge*). The term "technology" here means an augmenting factor which is external to the present amount of labour. This can mean improved machinery to produce goods and services or alternatively, this can be ...


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I like Justin's answer but I would point out that (fortunately) sellers don't even need to know about Supply, Demand, and Equilibria to react and adjust their prices as the theory suggests. Here is one of the stories I tell my students in Intro to Micro and which does not require sellers (or buyers for that sake) to have any understanding or abstract ...


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The issue is more complex than your friend suggest and he is not completely right but at the same time there is a kernel of truth to what he is claiming. There are differences in the effect of savings short and medium and long run. However, to fully explain this I will have to use some math to ground the reasoning and make everything consistent. Consider ...


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Explaining the shape of the horizontal range In the very short run, the AS curve is perfectly price-elastic (i.e. on the diagram, it is a horizontal line). It is also referred to as the Keynesian range. In this time period, firms respond to a rise in demand for their product without considering the effects of the rising demand, such as higher prices. This ...


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CDs are money market instruments and hence are financial asset. There are traditional and negotiable CDs. Traditional CDs are like term deposits in banks, and are not tradable. Liquidation before maturity entails penalty charges. Negotiable CDs can be traded in the secondary market (referred to as money market). The original holder can 'liquidate' them ...


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