5

The issue you are asking about is tax incidence. This Wikipedia entry provides a good introduction. In short: it depends on how easily supply and demand respond to price changes relatively to each other, the so called price elasticity of demand and supply. According to standard theory, it doesn't matter who pays (in the legal/fiscal sense) the taxes, as the ...


4

In first world countries, the price of a bottle of water is set by a well-established market. There are millions of prospective buyers of a bottle of water and thousands of prospective suppliers, and while many suppliers are able to achieve brand differentiation, for the most part their water is fungible. Moreover, the supply and demand curves of water are ...


4

It is true that mainstream economics (which includes neoclasicall economics) is empirical but note that any explanation can only arise from theory (whether theory is explicitly formulated or only implicit in the background), and any theory is based upon assumptions. Empiricism does not mean you don't build theoretical models with assumptions, it means you ...


3

Transaction costs (or fees, though I have always heard it as costs) is anything that complicates or prevents a transaction. This includes the example you are suggesting, but also things like the costs of suing, or if many people own the river and it is hard for them to organize and strike a deal. Maybe the legal system is terrible and people break deals all ...


2

Time is money When the average daily wage is 5 dollars, and many others survive on 1-2 dollars a day, it's worth it to many people to take a few minutes to try to get an extra nickel or dime out of the sale. Also, with high unemployment (especially in cities, since in rural areas there is the availability of subsistence farming as an alternative), the ...


2

I think the best approach to describe this phenomenon is to see it as a change from relational-oriented economics of poor countries (developing countries) to transactional-oriented economics of developed countries. The first is governed by uncertainty: the good’s value is what the customer is willing to pay, it difficult for the seller to calculate all the ...


1

As I read Smith this was because gold and silver were used as currencies. So in Smith’s view you do not earn profit on settling your accounts you earn profit on resale of what you imported or from returns on the investment you bought with your gold. E.g. if you buy widget from China and sell it in the US is your profit derived from sending dollars to the ...


1

I haven't gone through all the papers so I just sampled 'The Firm as an Incentive System'. Browsing through it, it relies on Linear Algebra and Real Analysis. Again, I warn that I have not gone through the entire paper but seeing some of the terminology used there, I could guess that these two a clearly involved (maybe they use some bit of topology as well). ...


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