10 votes
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Can the stock market grow faster than GDP indefinitely?

There are trends that has allowed stock markets in advanced economies to grow faster than GDP for a long time: Branching out abroad. This gives access to faster growing markets in developing ...
Klas Lindbäck's user avatar
5 votes

Why isn't "long-run aggregate demand (or LRAD)" a thing?

The main reason why long run aggregate supply is vertical is that in the end the production capacity of every country is limited. In the end there is always some maximum number of number of stuff we ...
1muflon1's user avatar
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5 votes
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How could real house prices tend to rise in the long-term?

As I read your question, you actually ask two distinct question, one whether house prices can be assumed to have positive trend, and one about whether population or something else causes prices to ...
1muflon1's user avatar
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4 votes
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Equivalence of producer surplus areas

The profit of a firm $i$ is given by: $$ \pi_i(p) = p q_i - C_i(q_i) $$ where $p$ is the price, $q$_i is the output of firm $i$ and $C_i(.)$ is the cost function which differs across firms. The first ...
tdm's user avatar
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4 votes

How could real house prices tend to rise in the long-term?

"conventional wisdom seems to back up the idea that real house prices tend to increase over time" Not clear that's correct. See, for e.g., "House Prices and Fundamentals: 355 Years of ...
user37978's user avatar
4 votes
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Why do we omit the integral when deriving the f.o.c.’s in long-run growth models such as Romer (1990)?

The justification for this rule of thumb is the calculus of variations, specifically with the functional derivative. First, note that the problem is static, so for ease of notation I'll drop the ...
Wittgenstein's Poker's user avatar
3 votes

Why is the supply function the first derivative of the profit function in the long run?

First, this only works in perfect competition so it is not a general result. Second, the reason why it works is that, first derivative wrt quantity is the condition for maximizing profit. Profit ...
1muflon1's user avatar
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3 votes

How could real house prices tend to rise in the long-term?

First, notice that comparison of the change in the house prices with risk-free rate doesn't tell you anything about the change in the real house price. You need to compare the change in nominal house ...
Econlover's user avatar
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3 votes
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Deriving long-run cost functions from production function

Don't get stuck with math. Look again at the production function. Perhaps draw out isoquant curves (for the same output, how could you vary $K$ and $L$). How are the isoquants for this production ...
Art's user avatar
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2 votes

Number of firms in Long Run

Yes, it is possible. In the long run, firms enter until they break even. Suppose firms are symmetric. Then for each firm the break even condition is that the average costs equal the price. This is ...
BB King's user avatar
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2 votes
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In the long run, would a production-possibility curve expand outward if the country preferred more consumer goods than capital goods?

To keep things simple, let's assume that inputs to production other than capital goods are constant over time, and that production technology is regarded as one of those inputs (ie there is no ...
Adam Bailey's user avatar
  • 8,346
2 votes

Is it possible that the minimum point of a short run cost curve does not touch the long run cost curve?

The idea that the long run average cost curve (LRAC) must pass through the minimum points of the short run average cost curves (SRAC) is a fallacy, but it seems to be a remarkably plausible one. It ...
Adam Bailey's user avatar
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2 votes

Can the stock market grow faster than GDP indefinitely?

Some great answers miss your point because they focus on indexes, whereas you are asking simply about the market value of the x largest companies relative to gdp, if there is a limit. Indices are ...
Edward's user avatar
  • 21
2 votes

Can the stock market grow faster than GDP indefinitely?

Investing in the stock market gives you access to two things: A stake in the companies whose shares you own, including income that they generate and reinvest in new internal projects. Access to a ...
oli5679's user avatar
  • 121
2 votes
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How would a perfectly competitive industry respond to a macroeconomic demand shock in the long run?

You indirectly answered your own question when you stated: Of course, here I am comparing apples to oranges (somewhat deliberately). You are trying to compare something that is incomparable Demand ...
1muflon1's user avatar
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1 vote

Reference books that treat retirement savings/pension systems

If you look for some introductory treatment you can have look at Baar The Economics of the Welfare State Ch 7. However, you should also read some of the preceding chapters to get full context. What ...
1muflon1's user avatar
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1 vote

Why is the supply function the first derivative of the profit function in the long run?

Hotelling’s Lemma states that for the indirect profit function $\Pi^\star(p,w,r)$, we have that the firm’s output supply is given by: $q^s = \frac{d \Pi^\star}{dp}$ Here is its proof: The optimized ...
Nicolas Torres's user avatar
1 vote

Long-run equilibrium number of firms is indeterminate when all firms in the industry share the same constant technology and factor prices are same

Responding first to a comment under the original post, in this particular case, the mathematical model has been almost fully described verbally: constant-returns to scale, price-taking behavior in the ...
Alecos Papadopoulos's user avatar
1 vote

how does monopolisitic competition make profit in the long run in reality

First of all KFC and similar large fast food chain are not a good example of monopolistic firm, at least not in most countries they are more closely related to oligopoly. The reason for that is that ...
1muflon1's user avatar
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1 vote
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Why is the number of firms in the short run fixed?

Because by definition of short-run it is not possible. In economics, short-run is defined as a period when (some) factors/variables are fixed and not flexible. Consequently, by definition firm cannot ...
1muflon1's user avatar
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1 vote

Sidrauski Monetary Model and Neutrality

The Sidrauski model is equivalent to a model with 2 consumption goods where the second good (money) is produced costlessly by the government. Inflation is equivalent to raising the price of the second ...
LutzHendricks's user avatar
1 vote
Accepted

Difference between long run coefficient and non stochastic steady state coefficient ARDL model

yes, the term that you showed for the ALDR non-stochastic steady state: $$\frac{ \beta_1 + \beta_2 }{1- \rho_1 -\rho_2}$$ is long-run multiplier or sometimes also called long run equilibrium ...
1muflon1's user avatar
  • 55.5k
1 vote

Can the stock market grow faster than GDP indefinitely?

If survivor bias means that more successful firms more typically list on a public exchange and less successful firms do so less often, then it would be possible for "the stock market" to grow faster ...
nathanwww's user avatar
  • 626
1 vote

Is it possible that the minimum point of a short run cost curve does not touch the long run cost curve?

Adam Bailey is correct. Consider the production function $f(x_1,x_2) = x_1 + x_2/2$ where $(x_1,x_2)$ are inputs. If the input costs are $w_1=w_2=1$ and all inputs are freely chosen, the solution to ...
Giskard's user avatar
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1 vote

Accelerator and Multiplier effects at full employment

Grigory, I am glad you are skeptical of this 'theory'. I am not sure I understand you line of argument correctly, but given the assumptions it seems to be correct. Accelerator cannot be sustained in ...
ElChorro's user avatar
  • 231
1 vote
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How does the self-corecting mechanism put the economy back to long run equilibrium following a negative shock on the stick-wage SRAS?

The SRAS wage price being bumped up temporarily means that employers are forced to pay more for labour. From the graph, you can see aggregate demand is much lower at the higher wage price (SRAS1) ...
serakfalcon's user avatar
1 vote

Why are the concepts of short-run and long-run equilibrium exclusive to aggregate supply and demand and macroeconomics?

The concepts of short-run and long-run equilibria certainly feature in microeconomics. Indeed, they have done so for over a century: see Marshall's Principles of Economics (1890).
Adam Bailey's user avatar
  • 8,346
1 vote

Is there any difference between using LRAC and LRATC in a long-run market structure diagram?

It is one and the same thing. Notation might be different.
Sub-Optimal's user avatar
  • 1,106

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