Marshall Explained Time Element in Price Determination
Alfred Marshall, a seminal figure in economics, was the first to systematically explain the critical role of the time element in determining prices. He differentiated price behavior based on different time periods.
Economic Significance of Time Periods
Marshall identified distinct time frames influencing price adjustments:
- Market Period: A very short period where supply is fixed and cannot respond to price changes. Prices are determined mainly by demand.
- Short Period: A period where supply can be adjusted to some extent, but capital equipment remains fixed. Prices are influenced by both demand and supply adjustments.
- Long Period: A period long enough for firms to adjust all factors of production, including capital, and for new firms to enter or existing firms to leave the industry. Prices are primarily determined by the costs of production.
- Secular Period: A very long period allowing for fundamental changes in population, technology, and capital accumulation, influencing long-period equilibrium prices.
By incorporating these time dimensions, Marshall provided a more nuanced understanding of how prices are formed and adjust in response to market forces, moving beyond static equilibrium models.
Important Questions from Microeconomics
Which of the following statement is correct?
I. Indifference curves are sloping from left to right.
II. Higher indifference curve gives a higher level of utility.
If in a production process, all inputs are tripled, which of the following statements follows?
I. If the output is tripled, then decreasing returns to scale apply.
II. When the output is doubled, constant returns to scale apply.
III. If the output is more than tripled, then increasing returns to scale apply.
When it is not possible to make someone good without harming someone, then such a situation is called
According to Ricardo what condition is necessary to make possible international trade between two countries?
Match List I with List II:
List- I
Shape of revenue curve of the firm
List – II
Market structure
A.
Kinked revenue-curve (I)
Monopolistic competition B.
Infinitely elastic straight line curve (II)
Perfect competition C.
Relatively less elastic curve (III)
Oligopoly D.
Relatively high elastic curve (IV)
Monopoly.
Choose the correct answer from the options given below -
