Market Theory and the Price System

Contents

contents Introduction to the Liberty Fund Edition by Peter J. Boettke and Frédéric Sautet xi Preface xvii 1. the nature and tasks of market theory 1 The Individual and the Market / The Market System / The Foundations of Market Theory / The Individual and Economic Behavior / Economic Theory and Economic Reality / Market Theory, Economic Theory, and Economics / Summary 2. the market: its structure and operation 14 The Conditions Under Which the Market Operates / Market Roles / The Structure of the Market System: Vertical Relationships / The Structure of the Market System: Horizontal Relationships / The Analysis of Human Action in the Market: The Concept of Equilibrium / Complete and Incomplete Equilibrium / The Pattern of Market Adjustment / The Changing Market / The Market System as a Whole / Summary 3. efficiency, coordination, and the market economy 35 The Economic Problem / Society and the Economic Problem / The Problem of Coordination / How the Market Solves the Problems of Coordination / The Coordinating Function of Profits in a Market Economy / Summary 4. utility theory 48 The Scale of Values / Marginal Utility / Diminishing Marginal Utility / The Marginal Utilities of Related Goods / Marginal Utility—Some Further Remarks / Marginal Utility and the Conditions for Exchange / Summary 5. consumer income allocation 68 Marginal Utility and the Allocation of Income / The Position of Consumer’s Equilibrium / A Geometrical Illustration / The Effects of Changes / The Individual Demand Curve / Some Remarks on Expectations / Summary viii contents 6. market demand 92 Market Demand / The Market Demand Curve / Demand Elasticity / Measures of Elasticity / Market Demand as Seen by the Individual Entrepreneur / Demand and Revenue / Demand and the Prices of Other Goods / Demand as a Market Force / Summary 7. market process in a pure exchange economy 113 The Nature of Competition / A Simple Case of Price Competition / Simple Price Competition Without Perfect Knowledge / The Market for Several Non-Producible Goods: The Problem / The Equilibrium Situation for the Multi-Commodity Market / The Multi-Commodity Market Without Perfect Knowledge / Monopoly in a Pure Exchange Market / The Agitation of the Market / Summary / Appendix 8. production theory 153 The Economic Aspect of Production / Production by the Isolated Individual / Production in Society / Production in the Market Economy / Factors of Production / Production Functions and Isoquants / The Shape of the Isoquant and the Substitutability of Factors / Changes in Factor Proportions, and Changes in the Scale of Factor Employment / Returns to Scale / The Laws of Variable Proportions: The Problem / The Laws of Variable Proportions / Economic Implications of the Laws of Variable Proportions / The Least-Cost Combination / Graphic Illustration of the Least-Cost Combination / Summary 9. costs and supply 197 Costs and Rents / Opportunity Costs and Supply Theory / Prospective and Retrospective Costs / Capital Goods and Cost Theory / Factor Divisibility and Short-Run Per-Unit Costs / Short-Run Costs and Their Effect on Supply / Long-Run Costs and Supply / Factor Prices and Supply / Summary 10. partial market processes—the determination of product prices and factor prices 227 The Market for a Single Product Long-Run Equilibrium / Short-Run Equilibrium in the Single-Product Market / Equilibrium in the Single-Product Market in the Very Short Run / Adjustment to Change in a Market for a Single Product / The Market Process in a Market for a Single Product contents ix The Market for a Single Factor of Production Equilibrium in a Factor Market / The Market Process in a Market for a Single Factor of Production Toward the General Market Process Summary 11. the general market process 255 A Preliminary Model / The Preliminary Model and the General Model / General Market Equilibrium Conditions / A General Market in Disequilibrium / Disequilibrium in the General Market and Entrepreneurial Opportunities / Entrepreneurial Activity and the General Market Process / Partial Analysis and the Analysis of a General Market / Toward Further Extensions of the General Market Model / Summary 12. monopoly and competition in the general market 286 The Monopolized Resource / The Resource Cartel / Restriction of Supply: A Special Case / Combinations of Resource Buyers / Monopoly in Production / The Consequences of Monopoly Output Restriction / The Monopolist-Producer as a Resource Buyer / Further Remarks on Monopolized Products / The Single Producer Without Monopoly / Some Remarks on the Model of “Pure” or “Perfect” Competition / Monopolistic Price Discrimination / Summary 13. the price system and the allocation of resources 321 The Possible Levels of “Welfare” Appraisal / Misallocation of a Resource in a Market System / Imperfect Knowledge, the Source of Resource Misallocation / Prices, Profits, and the Reallocation of Resources / The Entrepreneur and Resource Allocation / Resource Mobility and the Allocation Pattern / Monopoly as an Obstacle to Correct Resource Allocation / Artificial...