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REALISM OF PERFECT COMPETITION: Perfect competition is an idealized market structure that does NOT exist in the real world. While some real world industries might come relatively close to a one or two of the four key characteristics of perfect competition, none matches all four sufficiently that we can declare a perfectly competitively industry. Some industries come close on the large number of small firms and the identical product characteristics. A few industries have relatively good, although not perfect, information about prices and technology. However, almost all industries fall far short of the perfect mobility characteristics.

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Lesson 4: Production Possibilities | Unit 5: Investment Page: 23 of 24

Topic: Scarcity <=PAGE BACK | PAGE NEXT=>

Scarcity is THE economic problem. Investment in capital goods is the source of economic growth and progress that lessens the scarcity problem.
  • Some investment is good, but lot of investment is not necessarily better.
  • If we produce only capital goods and no consumption goods, eventually, with no consumption, people would die.
  • The trick is to strike a balance between capital goods and consumption goods.
  • Answering this question puts us into the realm of normative economics.

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ASSUMPTIONS, KEYNESIAN ECONOMICS

The macroeconomic study of Keynesian economics relies on three key assumptions--rigid prices, effective demand, and savings-investment determinants. First, rigid or inflexible prices prevent some markets from achieving equilibrium in the short run. Second, effective demand means that consumption expenditures are based on actual income, not full employment or equilibrium income. Lastly, important savings and investment determinants include income, expectations, and other influences beyond the interest rate. These three assumptions imply that the economy can achieve a short-run equilibrium at less than full-employment production.

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APLS

ORANGE REBELOON
[What's This?]

Today, you are likely to spend a great deal of time strolling through a department store looking to buy either a T-shirt commemorating the first day of winter or software that won't crash your computer. Be on the lookout for slightly overweight pizza delivery guys.
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This isn't me! What am I?

In 1914, Ford paid workers who were age 22 or older $5 per day -- double the average wage offered by other car factories.
"Most of the things worth doing in the world had been declared impossible before they were done."

-- Louis D. Brandeis, Supreme Court Justice

BPEA
Brookings Papers on Economic Activity
A PEDestrian's Guide
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