POL371H1 Lecture : Market Interaction
Document Summary
Lec 3 jan: market interaction and spatial equilibrium (slide 2) Neoclassical economics say that market signals automatically create a balance of interests. Due to a change in production conditions: products can be produced at a much better price. Mean for the same price more producers are willing to produce more. If the demand curve has not changed then an adjustment will take place. According to neoclassical economics a new equilibrium will emerge. You have a demand curve but no supply curve because supply is predetermined by the state. Incredibly difficult to measure the real supply or real demand curves. In the former socialist economies the production decisions and price decisions were also politically driven. General products (food for instance) were offered at a much lower than market price and thus the demand was much higher than the supply. Depending on how the economy is organised has a huge impact on how exchange of products takes place.
