You are welcome to ask any questions on Economics. Though you might also like to try google custom search (top right) to see if the topic has been covered before.
I am looking to explain economic principles / ideas/ recent developments in economics. I can’t promise to answer, but will try if it meets the criteria below.
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- I aim to try and simplify economics; as a rough guide I would aim at an understanding similar to a good British A Level student.
- I am looking to explain economic principles / ideas/ recent developments in economics.
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About The Author
Keynes’ writing on the MEC is, to say the least, opaque. The commentaries seem to concur with a formulation that makes perfect sense but which is not found in Keynes, viz
the MEC is a relation between the expected (net) return on a capital asset over its lifetime set against the cost of that asset. All very straightforward, but let’s see what Keynes actually wrote. Having discussed prospective yield, he says (emphasis added):
“Over against the prospective yield of the investment we have the supply price of the
capital-asset, meaning by this, NOT THE MARKET PRICE AT WHICH AN ASSET OF THE TYPE IN QUESTION CAN ACTUALLY BE PURCHASED IN THE MARKET, but the price which would just induce a manufacturer newly to produce an additional unit of such assets, i.e. what is sometimes called its replacement cost .”
So what is Keynes getting at? Does he intend to separate the investor…the economic agent looking at the prospective yield…from the manufacturer of the capital good? If not, does he attach some importance to the counterfactual notion of the investor being the manufacturer of the capital good? Even more puzzlingly, he explicitly says that the “supply price” of the capital good IS NOT the cost in the market of that good. But of course this is PRECISELY what all commentators seem to have assumed. Finally, I can make absolutely no sense of Keynes’ separation of the notion of “replacement cost” from the market price of that good.
Any thoughts? I presume I must be hopelessly confused!
Hi Tejvan,
A microeconomics question. In you labour market section you discuss a monopsonist.You say that “in order to employ one extra worker the firm has to increase the wages of all workers”- why? You give a coal mine as a possible example of a monopsonist, do you really think that a coal mine owner hired an extra worker(the marginal cost) and then incresed the “wages of all workers”? Can you clarify this.
My confusion gets worrse as on the same page you say that one of the problems with a monopsonist is it can “lead to lower wages for workers”.Doesn’t this contradict your above point about a monsonists increasing all workers’ wagesa as it employs one extra worker?
Or, is it all just theory? You taklk of supermarkets behavng like monopsonists but I’m pretty sure my local Tescos doesn’t increse the wages of all its workers when it hires an extra worker.
I came across a company recently which farms mussels of the coast of a small town in Bulgaria, and I started thinking about its structure in the economy. I know since it produces a homogenous product along with hundreds of other mussel farmers, it must be in perfect competition, however this mussel company also sold locally on top of selling to suppliers. This means it was the only mussel supplier (locally) in the town, and as far as I know that’s a monopoly. My question is, what would this company’s graphs look like? Would it be more like a perfect competition, or a monopoly? Although it is the only supplier in the town, it sells the mussels at the same price if not cheaper to locals as it does to suppliers, which I know unlike monopolies. Would there be any deadweight loss in a company like this? Is it inneficient or is it more efficient than normal? Consumers can buy mussels from the supermarket, but local supermarkets all get their supply of mussels from this one local company. Please help me understand!
https://www.economicshelp.org/blog/11378/economics/competition-in-the-seafood-industry/
Your articles are always great – simple and to the point. Keep it up.
Pros and cons of an independent Scotland – from an economics perspective it makes sense for Scotland to stay part of the UK but if you could articulate the arguments that would be great.
Thanks in advance.
Hi Shaznay,
I don’t have too much to add to these two articles I wrote a while back
https://www.economicshelp.org/blog/5156/economics/economics-of-scottish-independence/
https://www.economicshelp.org/blog/7379/economics/uk-pound-sterling-and-scottish-independence/
If the deficit, and therefore the amount that needs to be borrowed each year, is falling as David Cameron claims, why is the debt rising at a greater level than ever before?
Does an increase in Real Effective Exchange Rate increase or decreases international competitiveness for the country?