The fundamental theory of supply and demand economics essay

It was his explanation for the cause of the Great Depression for which he was, deservedly, most well known.

The fundamental theory of supply and demand economics essay

Christians, the charge runs, have preached private benevolence as a substitute for the more arduous, and more courageous, task of fighting to change the unjust economic structures that are responsible for poverty in the first place. Among the many Christian responses to this oft-heard accusation, two more recent ones are particularly noteworthy.

The first, represented by certain schools of Latin American liberation theology, attempts to enlist the Church in a socialist-inspired struggle for a more just society. The principal enemy in the struggle is capitalism, the supposedly exploitative nature of which this stream of liberation theology attacks as the root cause of poverty.

But unlike the liberationists, the neoconservatives insist that the capitalist free market, not the socialist centrally planned economy, holds the key to eradicating poverty without violating individual freedom. Only the free market, the neoconservatives argue, has demonstrated the ability to raise society to unprecedented heights of material prosperity while at the same time creating unprecedented guarantees of, and opportunities for, the expression of individual freedom.

We do not have to look beyond our own shores to see that the neoconservative proposal highlights important truths. Our own welfare system, for instance, has turned out to be a colossal failure. Significantly, a major reason for this failure has been the policy of redistributing the wealth of responsible economic agents without expecting and enabling the beneficiaries of this redistribution to become responsible economic agents in their own right.

That is, the welfare system has failed because it has not treated the poor as human persons having an innate dignity to be developed and expressed also in the economic sphere. They are also right to affirm that economic freedom is a sine qua non of such creativity.

The basic problem of social organization is how to coordinate the economic activities of large numbers of people….

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In advanced societies, the scale on which co-ordination is needed, to take full advantage of the opportunities offered by modern science and technology, is enormously greater.

Literally millions of people are involved in providing one another with their daily bread, let alone with their yearly automobiles. The challenge to the believer in liberty is to reconcile this widespread interdependence with individual freedom.

Fundamentally, there are only two ways of coordinating the economic activities of millions. One is central direction involving the use of coercion—the technique of the army and of the modern totalitarian state.

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The other is voluntary co-operation of individuals—the technique of the market-place. The possibility of coordination through voluntary cooperation rests on the elementary—yet frequently denied—proposition that both parties to an economic transaction benefit from it, provided the transaction is bi-laterally voluntary and informed.

It is rather to suggest that liberal economics puts forth a bad model of what free economic exchange itself is. Yet ideology is just what is at stake here. This claim, which may appear innocent enough at first, turns out, on closer inspection, to entail that the economic freedom supposedly provided by the market is indifferent towards the objective good of the person.

But, as I will argue below, a freedom indifferent to the objective good of the person is actually an unfreedom that leads to a coercive social order.

The fundamental theory of supply and demand economics essay

One of the stratagems by which liberalism conceals this fact is its hallmark claim that the market is neutral, by which it means that it impartially leaves open the question of the objective good of the person in order thereby to allow people with different worldviews to cooperate without first having to harmonize their respective convictions about that good.

Unfortunately, this reply begs precisely the question that is at issue: Is freedom truly best served by an agnosticism about the objective good of the person masquerading as the impersonal laws of the market? It is important to see, however, that rejection of this paradigm does not necessarily entail an absolute rejection of the idea of the free market.

Any economic system, such as that of the former Soviet Union, that tries to orchestrate economic exchanges from the outside using the coercive power of the state is doomed to sin against both the dignity of the human person and the requirements of good economics. At the same time, I will be arguing that the best, most central paradigm for understanding free economic exchange is not contract among self-interested strangers, but gift-giving among neighbors.

Since current market economies are largely liberal, the paradigm shift that I am recommending would entail a profound rethinking of many familiar economic practices and structures that we commonly take for granted.

Although this rethinking would call into question many comfortable certainties, it is not necessarily violent or utopian. This reconfiguration is necessary both to protect human freedom and to secure economic good sense—a double desideratum that liberal economics, if consistently applied, cannot fulfill.

Back to the neoconservatives Before going on to show why liberal economics cannot fulfill the double desideratum of securing human freedom and putting into practice sound economic rationality, I must deal briefly with a possible objection that it is unfair to the neoconservatives to accuse them of relying too heavily on liberal economics.

This objection is a significant one. If, in fact, I am wrong about the neoconservatives, then the necessity of a paradigm shift to an economics of gift will seem less compelling.The theories forming the basis of Keynesian economics were first presented in The General Theory of Employment, Interest and Money, published in It was his explanation for the cause of the Great Depression for which he was, deservedly, most well known.

Although Keynesian theories no longer. The difference between neoliberal economics and classical liberal economics is the rejection of Adam Smith’s theory of the invisible hand of supply and demand and believe it Continue Reading Essay on The Decline of American Economics.

As stated by Thomas, & Maurice, managerial economics is the result of two fundamental “areas of economic theory”, namely microeconomics and industrial organization (, p.

5). “Microeconomics is the study and analysis of the behavior of individual segments of the economy: individual consumers, workers and owners of resources, individual. - Definition of Topic: Economics is the study of supply and demand. It defines the ways that human beings allocate resources and how resources are distributed amongst a market.

It allows you to see trends in current market places and predict what may happen in the future. The first fundamental theorem of welfare economics is simply a restatement of Adam Smith’s theory in economics Free Essays; Essay writing help. Then we will see the partial equilibrium model of supply and demand.

Next, we will study General Equilibrium and Welfare Economics. Let us write or edit the essay on your topic "First. Supply and demand, in economics, relationship between the quantity of a commodity that producers wish to sell at various prices and the quantity that consumers wish to buy.

It is the main model of price determination used in economic theory.

Supply and demand - Wikipedia