ECON 19 Chapter Notes - Chapter 6: Commodity Market, Marginalism, Free Good
Document Summary
Labor market: drives up wages at expense of profits substitution. Commodity markets: competition forces capitalists to reduce costs to sell at lower prices more efficient production techniques organic composition of capital increases. Capitalists have to follow (2), otherwise they lose market share. However, this is not inevitable, falling wages: s/v . This was acknowledged by marx, but he just assumed a falling rate of profit. Rise of the reserve army of the unemployed. Aristotle: distinction between exchange value and use value. Demand factors: indigentia, need, utility in relation to scarcity. Supply factor: costs of production ( labor and expenses") Water is most useful but a free good, diamonds are pretty useless but expensive. Value cannot be a matter of usefulness. Demand in relation to supply; ratio between quantities price. Underneath price there is a natural value, long run-price determined by costs of production. Classicism was interested in this real" long-run price.
