Principles Of Marketing By Philip Kotler 15th Edition Pdf Free Download

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In finance, a foreign exchange option (commonly shortened to just FX option or currency option) is a derivative financial instrument that gives the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date.[1] See Foreign exchange derivative. The foreign exchange options market is the deepest, largest and most liquid market for options of any kind. Most trading is over the counter (OTC) and is lightly regulated, but a fraction is traded on exchanges like the International Securities Exchange, Philadelphia Stock Exchange, or the Chicago Mercantile Exchange for options on futures contracts. The global market for exchange-traded currency options was notionally valued by the Bank for International Settlements at $158.3 trillion in 2005 For example, a GBPUSD contract could give the owner the right to sell?1,000,000 and buy $2,000,000 on December 31. In this case the pre-agreed exchange rate, or strike price, is 2.0000 USD per GBP (or GBP/USD 2.00 as it is typically quoted) and the notional amounts (notionals) are?1,000,000 and $2,000,000. This type of contract is both a call on dollars and a put on sterling, and is typically called a GBPUSD put, as it is a put on the exchange rate; although it could equally be called a USDGBP call.

If the rate is lower than 2.0000 on December 31 (say 1.9000), meaning that the dollar is stronger and the pound is weaker, then the option is exercised, allowing the owner to sell GBP at 2.0000 and immediately buy it back in the spot market at 1.9000, making a profit of (2.0000 GBPUSD? 1.9000 GBPUSD)? 1,000,000 GBP = 100,000 USD in the process. If instead they take the profit in GBP (by selling the USD on the spot market) this amounts to 100,000 / 1.9000 = 52,632 GBP. Although FX options are more widely used today than ever before, few multinationals act as if they truly understand when and why these instruments can add to shareholder value. To the contrary, much of the time corporates seem to use FX options to paper over accounting problems, or to disguise the true cost of speculative positioning, or sometimes to solve internal control problems.

The standard clich? About currency options affirms without elaboration their power to provide a company with upside potential while limiting the downside risk.

Options are typically portrayed as a form of financial insurance, no less useful than property and casualty insurance. This glossy rationale masks the reality: if it is insurance then a currency option is akin to buying theft insurance to protect against flood risk. The truth is that the range of truly non-speculative uses for currency options, arising from the normal operations of a company, is quite small. In reality currency options do provide excellent vehicles for corporates' speculative positioning in the guise of hedging.

Corporates would go better if they didn't believe the disguise was real. Let's start with six of the most common myths about the benefits of FX options to the international corporation -- myths that damage shareholder values. Historically, the currency derivative pricing literature and the macroeconomics literature on FX determination have progressed separately. In this Chapter I argue the joint study of these two strands of literature and give an overview of FX option pricing concepts and terminology crucial for this interdisciplinary study. I also explain the three sources of information about market expectations and perception of risk that can be extracted from FX option prices and review empirical methods for extracting option-implied densities of future exchange rates.

As an illustration, I conclude the Chapter by investigating time series dynamics of option-implied measures of FX risk vis-a-vis market events and US government policy actions during the period January 2007 to December 2008. Chapter 2: This Chapter proposes using foreign exchange (FX) options with different strike prices and maturities to capture both FX expectations and risks. We show that exchange rate movements, which are notoriously difficult to model empirically, are well-explained by the term structures of forward premia and options-based measures of FX expectations and risk.

Although this finding is to be expected, expectations and risk have been largely ignored in empirical exchange rate modeling. Using daily options data for six major currency pairs, we first show that the cross section options-implied standard deviation, skewness and kurtosis consistently explain not only the conditional mean but also the entire conditional distribution of subsequent currency excess returns for horizons ranging from one week to twelve months. At June 30 and September 30, the value of the portfolio was?1,050,000. Note, however, that the notional amount of Ridgeway's hedging instrument was only?1,000,000. Therefore, subsequent to the increase in the value of the pound (which is assumed to have occurred on June 30), a portion of Ridgeway's foreign currency exchange risk was not hedged.

For the three-month period ending September 30, exchange rates caused the value of the portfolio to decline by $52,500. Of that amount, only $50,000 was offset by changes in the value of the currency put option.

The difference between those amounts ($2,500) represents the exchange rate loss on the unhedged portion of the portfolio (i.e., the 'additional'?50,000 of fair value that arose through increased share prices after entering into the currency hedge). At June 30, the additional?50,000 of stock value had a U.S. Dollar fair value of $45,000. At September 30, using the spot rate of 0.85:1, the fair value of this additional portion of the portfolio declined to $42,500. Ridge way will exclude from its assessment of hedge effectiveness the portion of the fair value of the put option attributable to time value. That is, Ridgeway will recognize changes in that portion of the put option's fair value in earnings but will not consider those changes to represent ineffectiveness.

Aitan Goelman, the CFTC’s Director of Enforcement, stated: “The setting of a benchmark rate is not simply another opportunity for banks to earn a profit. Countless individuals and companies around the world rely on these rates to settle financial contracts, and this reliance is premised on faith in the fundamental integrity of these benchmarks.

The market only works if people have confidence that the process of setting these benchmarks is fair, not corrupted by manipulation by some of the biggest banks in the world.” The Commission finalized rules to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act regarding Regulation of Off-Exchange Retail Foreign Exchange Transactions and Intermediaries. The Commission also finalized Conforming Changes to existing Retail Foreign Exchange Regulations in response to the Dodd-Frank Act. Additional information regarding these final rules is provided below, including rules, factsheets, and details of meetings held between CFTC Staff and outside parties.

• • • Capitalism is an and an based on of the and their operation for. Characteristics central to capitalism include,,,, a and. In a capitalist, decision-making and investment are determined by the owners of the means of production in and, whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.,,, and have adopted different perspectives in their analyses of capitalism and have recognized various forms of it in practice. These include or capitalism, and. Different forms of capitalism feature varying degrees of free markets, public ownership, obstacles to free competition and state-sanctioned. The degree of in markets, the role of and regulation and the scope of state ownership vary across different. The extent to which different markets are free, as well as the rules defining private property, are matters of politics and.

Most existing capitalist economies are, which combine elements of free markets with state intervention and in some cases. Have existed under many, in many different times, places and cultures.

However, the development of capitalist societies marked by a universalization of -based social relations, a consistently large and system-wide and a capitalist class which dominates control of wealth and political power developed in in a process that led to the. Have since become dominant in the and continue to spread. Capitalism has been criticized for establishing power in the hands of a minority capitalist class that exists through the exploitation of a working class majority; for prioritizing profit over social good, natural resources and the environment; and for being an engine of inequality and economic instabilities. Supporters argue that it provides better products through competition, creates strong economic growth, yields productivity and prosperity that greatly benefits society, as well as being the most efficient system known for allocation of resources. Contents • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Etymology [ ] Other terms sometimes used for capitalism: • • • Free enterprise • Free enterprise economy • • Free market economy • • • • • Self-regulating market • Profits system The term 'capitalist', meaning an owner of, appears earlier than the term 'capitalism' and it dates back to the mid-17th century. 'Capitalism' is derived from capital, which evolved from capitale, a late word based on caput, meaning 'head' – also the origin of and in the sense of movable property (only much later to refer only to livestock). Capitale emerged in the 12th to 13th centuries in the sense of referring to funds, stock of merchandise, sum of money or money carrying interest.

By 1283, it was used in the sense of the capital assets of a trading firm and it was frequently interchanged with a number of other words – wealth, money, funds, goods, assets, property and so on. The Hollandische Mercurius uses capitalists in 1633 and 1654 to refer to owners of capital. In French, referred to capitalistes in 1788, six years before its first recorded English usage by in his work Travels in France (1792). In his (1817), referred to 'the capitalist' many times., an English poet, used 'capitalist' in his work Table Talk (1823).

Used the term 'capitalist' in his first work, (1840), to refer to the owners of capital. Used the term 'capitalist' in his 1845 work. The initial usage of the term 'capitalism' in its modern sense has been attributed to in 1850 ('What I call 'capitalism' that is to say the appropriation of capital by some to the exclusion of others') and Pierre-Joseph Proudhon in 1861 ('Economic and social regime in which capital, the source of income, does not generally belong to those who make it work through their labour'). And referred to the 'capitalistic system' and to the 'capitalist mode of production' in (1867).

The use of the word 'capitalism' in reference to an economic system appears twice in Volume I of The Capital, p. 124 (German edition) and in Theories of Surplus Value, tome II, p. 493 (German edition). Marx did not extensively use the form capitalism, but instead those of capitalist and capitalist mode of production, which appear more than 2,600 times in the trilogy The Capital. According to the (OED), the term 'capitalism' first appeared in English in 1854 in the novel by novelist, where he meant 'having ownership of capital'. Also according to the OED,, a and, used the phrase 'private capitalism' in 1863. Main article: has existed incipiently on a small scale for centuries, in the form of merchant, renting and lending activities, and occasionally as small-scale industry with some wage labour.

Simple exchange, and consequently simple commodity production, which are the initial basis for the growth of capital from trade, have a very long history. The 'capitalistic era' according to Karl Marx dates from 16th century merchants and small urban workshops. Marx knew that wage labour existed on a modest scale for centuries before capitalist industry. Early Islam promulgated capitalist economic policies, which migrated to Europe through trade partners from cities such as Venice. Capitalism in its modern form can be traced to the emergence of agrarian capitalism and mercantilism in the. Thus for much of history, capital and commercial trade existed, but it did not lead to industrialisation or dominate the production process of society. That required a set of conditions, including specific technologies of mass production, the ability to independently and privately own and trade in means of production, a class of workers willing to sell their for a living, a framework promoting commerce, a physical infrastructure allowing the circulation of goods on a large scale, and security for private accumulation.

Many of these conditions do not currently exist in many countries, although there is plenty of capital and labour. Thus, the obstacles for the development of capitalist markets are less technical and more social, cultural and political. Agrarian capitalism [ ] The economic foundations of the feudal agricultural system began to shift substantially in 16th-century England; the had broken down, and land began to become concentrated in the hands of fewer landlords with increasingly large estates. Instead of a -based system of labor, workers were increasingly employed as part of a broader and expanding money-based economy. The system put pressure on both landlords and tenants to increase the productivity of agriculture to make profit; the weakened coercive power of the to extract peasant encouraged them to try better methods, and the tenants also had incentive to improve their methods, in order to flourish in a competitive.

Terms of rent for land were becoming subject to economic market forces rather than to the previous stagnant system of custom and feudal obligation. By the early 17th-century, England was a centralized state in which much of the feudal order of had been swept away. This centralization was strengthened by a good system of roads and by a disproportionately large capital city,. The capital acted as a central market hub for the entire country, creating a very large internal market for goods, contrasting with the fragmented feudal holdings that prevailed in most parts of the.

Mercantilism [ ]. A painting of a French seaport from 1638 at the height of The economic doctrine prevailing from the 16th to the 18th centuries is commonly called. This period, the, was associated with the geographic exploration of the foreign lands by merchant traders, especially from England and the. Mercantilism was a system of trade for profit, although commodities were still largely produced by non-capitalist methods. Most scholars consider the era of merchant capitalism and mercantilism as the origin of modern capitalism, although argued that the hallmark of capitalism is the establishment of generalized markets for what he called the 'fictitious commodities:' land, labor, and money. Accordingly, he argued that 'not until 1834 was a competitive labor market established in England, hence industrial capitalism as a social system cannot be said to have existed before that date. After the, which began rule in India England began a large-scale and integrative approach to mercantilism during the (1558–1603).

A systematic and coherent explanation of balance of trade was made public through 's argument England's Treasure by Forraign Trade, or the Balance of our Forraign Trade is The Rule of Our Treasure. It was written in the 1620s and published in 1664. European, backed by state controls, subsidies, and, made most of their profits by buying and selling goods. In the words of, the purpose of mercantilism was 'the opening and well-balancing of trade; the cherishing of manufacturers; the banishing of idleness; the repressing of waste and excess by sumptuary laws; the improvement and husbanding of the soil; the regulation of prices.' The and the inaugurated an expansive era of commerce and trade.

These companies were characterized by their and powers given to them by nation-states. During this era, merchants, who had traded under the previous stage of mercantilism, invested capital in the East India Companies and other colonies, seeking a. Industrial capitalism [ ]. A: the fuelled primarily by propelled the in In the mid-18th century, a new group of economic theorists, led by and, challenged fundamental doctrines such as the belief that the world's wealth remained constant and that a state could only increase its wealth at the expense of another state. During the, industrialists replaced merchants as a dominant factor in the capitalist system and affected the decline of the traditional handicraft skills of, guilds, and. Also during this period, the surplus generated by the rise of commercial agriculture encouraged increased mechanization of agriculture. Industrial capitalism marked the development of the system of manufacturing, characterized by a complex between and within work process and the routine of work tasks; and finally established the global domination of the capitalist mode of production.

Britain also abandoned its policy, as embraced by mercantilism. In the 19th century, and, who based their beliefs on the, initiated a movement to lower tariffs. In the 1840s, Britain adopted a less protectionist policy, with the repeal of the and the. Britain reduced and, in line with David Ricardo's advocacy for. Modern capitalism [ ]. The formed the financial basis of the international economy from 1870–1914 Capitalism was carried across the world by broader processes of and, by the end of the 18th century, became the dominant global economic system, in turn intensifying processes of economic and other globalization.

Later, in the 20th century, capitalism overcame a challenge by and is now the encompassing system worldwide, with the being its dominant form in the industrialized Western world. Allowed cheap production of household items using, while rapid population growth created sustained demand for commodities. Globalization in this period was decisively shaped by 18th-century. After the and and the completion of British conquest of India, vast populations of these regions became ready consumers of European exports. Also in this period, areas of sub-Saharan Africa and the Pacific islands were incorporated into the world system. Meanwhile, the conquest of new parts of the globe, notably sub-Saharan Africa, by Europeans yielded valuable natural resources such as, and and helped fuel trade and investment between the European imperial powers, their colonies, and the United States. The inhabitant of London could order by telephone, sipping his morning tea, the various products of the whole earth, and reasonably expect their early delivery upon his doorstep.

Militarism and imperialism of racial and cultural rivalries were little more than the amusements of his daily newspaper. What an extraordinary episode in the economic progress of man was that age which came to an end in August 1914. In this period, the global financial system was mainly tied to the. The first formally adopted this standard in 1821. Soon to follow were in 1853, in 1865, the and Germany ( ) in 1873. New technologies, such as the, the, the, the and allowed goods and information to move around the world at an unprecedented degree.

The New York (1963) In the period following the global depression of the 1930s, the state played an increasingly prominent role in the capitalistic system throughout much of the world. The postwar boom ended in the late 1960s and early 1970s, and the situation was worsened by the rise of., a modification of Keynesianism that is more compatible with laissez-faire, gained increasing prominence in the capitalist world, especially under the leadership of in the U.S. And in the UK in the 1980s.

Public and political interest began shifting away from the so-called concerns of Keynes's managed capitalism to a focus on individual choice, called 'remarketized capitalism'. According to Harvard academic a new genus of capitalism, monetizes data acquired through. She states it was first discovered and consolidated at, emerged due to the 'coupling of the vast powers of the with the radical indifference and intrinsic narcissism of the and its vision that have dominated commerce for at least three decades, especially in the Anglo economies' and depends on the global architecture of computer mediation which produces a distributed and largely uncontested new expression of power she calls 'Big Other'. Relationship to democracy [ ]. Many analysts [ ] assert that is one of the main examples of in the 21st century The relationship between and capitalism is a contentious area in theory and in popular political movements.

The extension of universal adult male in 19th century Britain occurred along with the development of industrial capitalism, and democracy became widespread at the same time as capitalism, leading capitalists to posit a causal or mutual relationship between them. However, in the 20th century, according to some authors, capitalism also accompanied a variety of political formations quite distinct from liberal democracies, including regimes, absolute monarchies, and single-party states. Democratic peace theory asserts that democracies seldom fight other democracies, but critics of that theory suggest that this may be because of political similarity or stability rather than because they are democratic or capitalist. Moderate critics argue that though economic growth under capitalism has led to democracy in the past, it may not do so in the future, as regimes have been able to manage economic growth without making concessions to greater political freedom.

One of the biggest supporters of the idea that capitalism promotes political freedom, Milton Friedman, argues that competitive capitalism allows economic and political power to be separate, ensuring that they do not clash with one another. This idea has been challenged given the current influence capitalist lobbying has had on policy in the United States.

The approval of, has led people to question the very idea that competitive capitalism promotes political freedom. The ruling on Citizens United allows corporations to spend undisclosed and unregulated amounts of money on political campaigns, shifting outcomes to the interests and undermining true democracy. As explained in Robin Hahnel’s writings, the centerpiece of the ideological defense of the free market system is the concept of economic freedom, and that supporters equate economic democracy with economic freedom and claim that only the free market system can provide economic freedom. According to Hahnel, there are a few objections to the premise that capitalism offers freedom through economic freedom.

These objections are guided by critical questions about who or what decides whose freedoms are more protected. Often, the question of inequality is brought up when discussing how well capitalism promotes democracy.

An argument that could stand is that economic growth can lead to inequality given that capital can be acquired at different rates by different people. In, of the asserts that inequality is the inevitable consequence of economic growth in a capitalist economy and the resulting can destabilize democratic societies and undermine the ideals of social justice upon which they are built., (except for ), and other argue that capitalism is incompatible with democracy since capitalism according to Marx entails 'dictatorship of the ' (owners of the means of production) while democracy entails rule by the people. [ ] States with capitalistic economic systems have thrived under political regimes deemed to be authoritarian or oppressive. Singapore has a successful open market economy as a result of its competitive, business-friendly climate and robust rule of law; nonetheless, it often comes under fire for (1) its brand of government, which, though democratic and consistently one of the least corrupt, operates largely under a one-party rule, and (2) not vigorously defending freedom of expression, given its government-regulated press, as well as penchant for upholding laws protecting ethnic and religious harmony, judicial dignity and personal reputation. The private (capitalist) sector in the People's Republic of China has grown exponentially and thrived since its inception, despite having an authoritarian government. 's rule in Chile led to economic growth and high levels of inequality by using authoritarian means to create a safe environment for investment and capitalism.

Varieties of capitalism [ ] Peter A. Hall and argued that modern economies have developed two different forms of capitalism: liberal market economies (or LME) (e.g. US, UK, Canada, New Zealand, Ireland) and coordinated market economies (CME) (e.g. Germany, Japan, Sweden, Austria). Those two types can be distinguished by the primary way in which firms coordinate with each other and other actors, such as. In LMEs firms primarily coordinate their endeavors by way of hierarchies and market mechanisms.

Coordinated market economies more heavily rely on non-market forms of interaction in the coordination of their relationship with other actors (for a detailed description see ). These two forms of capitalisms developed different, and,, inter-firm relations and relations with employees. The existence of these different forms of capitalism has important societal effects, especially in periods of crisis and instability. Since the early 2000s the number of labor market outsiders has rapidly grown in Europe, especially among the youth, potentially influencing social and political participation. Using varieties of capitalism theory it is possible to disentangle the different effects on social and political participation that an increase of labor market outsiders has in liberal and coordinated market economies (Ferragina et al.

The social and political disaffection, especially among the youth, seems to be more pronounced in liberal than coordinated market economies. This signals an important problem for liberal market economies in a period of crisis. If the market does not provide consistent job opportunities (as it has in previous decades), the shortcomings of liberal social security systems may depress social and political participation even further than in other capitalist economies.

Characteristics [ ]. Further information: Capitalism is 'production for exchange' driven by the desire for personal accumulation of money receipts in such exchanges, mediated by free markets. The markets themselves are driven by the needs and wants of consumers and those of society as a whole. Contemporary mainstream economics, particularly that associated with the, holds that by an ', through little more than the freedom of the market, is able to match social production to these needs and desires. Summary [ ] In general, capitalism as an economic system and mode of production can be summarised by the following: •: Production for profit and accumulation as the implicit purpose of all or most of production, constriction or elimination of production formerly carried out on a common social or private household basis. •: Production for exchange on a market; to maximise instead of.

• of the means of production: • High levels of. • The of money to make a profit. • The use of the to allocate resources between competing uses. The market [ ]. The price (P) of a product is determined by a balance between production at each price (supply, S) and the desires of those with at each price (demand, D): this results in a market equilibrium, with a given quantity (Q) sold of the product, whereas a rise in demand would result in an increase in price and an increase in output In free-market and forms of capitalism, markets are used most extensively with minimal or no regulation over the pricing mechanism.

In mixed economies, which are almost universal today, markets continue to play a dominant role but are regulated to some extent by government in order to correct, promote, conserve, fund and or for other reasons. In systems, markets are relied upon the least, with the state relying heavily on or indirect economic planning to accumulate capital. Supply is the amount of a good or service produced by a firm and which is available for sale. Demand is the amount that people are willing to buy at a specific price. Prices tend to rise when demand exceeds supply, and fall when supply exceeds demand. In theory, the market is able to coordinate itself when a new equilibrium price and quantity is reached. Competition arises when more than one producer is trying to sell the same or similar products to the same buyers.

In capitalist theory, competition leads to innovation and more affordable prices. Without competition, a or may develop.

A monopoly occurs when a firm supplies the total output in the market; the firm can therefore limit output and raise prices because it has no fear of competition. A cartel is a group of firms that act together in a monopolistic manner to control output and prices. Efforts are made by government to prevent the creation of monopolies and cartels. In 1890, the Sherman Anti-Trust Act became the first legislation passed by the U.S. Congress to limit monopolies. Profit motive [ ] The is a theory in capitalism which posits that the ultimate goal of a business is to make money. Stated differently, the reason for a business's existence is to turn a profit.

The profit motive functions on the, or the theory that individuals tend to pursue what is in their own best interests. Accordingly, businesses seek to benefit themselves and/or their shareholders by maximizing profits.

In capitalist theoretics, the profit motive is said to ensure that resources are being allocated efficiently. For instance, explains: “If there is no profit in making an article, it is a sign that the labor and capital devoted to its production are misdirected: the value of the resources that must be used up in making the article is greater than the value of the article itself.' In other words, profits let companies know whether an item is worth producing. Theoretically in free and competitive markets, maximising profits ensures that resources are not wasted. Private property [ ] The relationship between the, its formal mechanisms, and capitalist societies has been debated in many fields of social and political theory, with active discussion since the 19th century.

Is a contemporary economist who has argued that an important characteristic of capitalism is the functioning state protection of property rights in a formal property system where ownership and transactions are clearly recorded. According to de Soto, this is the process by which physical assets are transformed into capital, which in turn may be used in many more ways and much more efficiently in the market economy. A number of Marxian economists have argued that the in England, and similar legislation elsewhere, were an integral part of capitalist and that specific legal frameworks of private land ownership have been integral to the development of capitalism. Market competition [ ]. Main article: In capitalist economics, market competition is the rivalry among sellers trying to achieve such goals as increasing profits, market share, and sales volume by varying the elements of the: price, product, distribution, and promotion.

Merriam-Webster defines competition in business as 'the effort of two or more parties acting independently to secure the business of a third party by offering the most favourable terms'. It was described by in (1776) and later economists as allocating productive to their most highly valued uses and encouraging. Smith and other before were referring to price and non-price rivalry among producers to sell their goods on best terms by bidding of buyers, not necessarily to a large number of sellers nor to a market in final. Competition is widespread throughout the.

It is a condition where 'buyers tend to compete with other buyers, and sellers tend to compete with other sellers'. In offering goods for exchange, buyers competitively bid to purchase specific quantities of specific goods which are available, or might be available if sellers were to choose to offer such goods. Similarly, sellers bid against other sellers in offering goods on the market, competing for the attention and exchange resources of buyers. Competition results from – there is never enough to satisfy all conceivable human wants – and occurs 'when people strive to meet the criteria that are being used to determine who gets what'. Reserve army of labour [ ].

Main article: In a Marxist analysis of the capitalist economy, the reserve army of labour refers to the and. It is synonymous with 'industrial reserve army' or 'relative surplus population', except that the unemployed can be defined as those actually looking for work and that the relative surplus population also includes people unable to work.

The use of the word 'army' refers to the workers being conscripted and regimented in the workplace in a, under the. Prior to the start of the capitalist era in human history (i.e.

Before the 1500s), on a mass scale rarely existed, other than that caused by natural disasters and wars. In ancient societies, all people who could work necessarily had to work, otherwise they would starve; a slave or a serf by definition could not become 'unemployed'. There was normally very little possibility of 'earning a crust' without working at all, and the usual attitude toward beggars and idlers was harsh.

Children began to work already at a very early age. Indeed, the word 'employment' is linguistically a product of the capitalist era. A permanent level of unemployment presupposes a working population which is to a large extent dependent on a wage or salary for a living, without having other means of livelihood, as well as the right of enterprises to hire and fire employees in accordance with commercial or economic conditions.

The expression 'unemployed' in English, in the sense of 'temporarily out of work', dates back to the 1660s; reference to 'the unemployed' as a group was first made in 1782; and reference to 'unemployment' as a general condition is first attested in 1888. The first recorded discussion of the reserve army of labour is in a manuscript written by: Big industry constantly requires a reserve army of unemployed workers for times of. The main purpose of the bourgeois in relation to the worker is, of course, to have the commodity labour as cheaply as possible, which is only possible when the supply of this commodity is as large as possible in relation to the demand for it, i.e., when the overpopulation is the greatest. Overpopulation is therefore in the interest of the bourgeoisie, and it gives the workers good advice which it knows to be impossible to carry out. Since capital only increases when it employs workers, the increase of capital involves an increase of the proletariat, and, as we have seen, according to the nature of the relation of capital and labour, the increase of the proletariat must proceed relatively even faster. Which is also expressed as a law of nature, that population grows faster than the means of subsistence, is the more welcome to the bourgeois as it silences his conscience, makes hard-heartedness into a moral duty and the consequences of society into the consequences of nature, and finally gives him the opportunity to watch the destruction of the proletariat by starvation as calmly as other natural event without bestirring himself, and, on the other hand, to regard the misery of the proletariat as its own fault and to punish it.

To be sure, the proletarian can restrain his natural instinct by reason, and so, by moral supervision, halt the law of nature in its injurious course of development. — Karl Marx,, December 1847 Marx introduced the concept in chapter 25 of the first volume of, which states: Capitalistic accumulation itself. Constantly produces, and produces in the direct ratio of its own energy and extent, a relatively redundant population of workers, i.e., a population of greater extent than suffices for the average needs of the of capital, and therefore a surplus-population. It is the absolute interest of every capitalist to press a given quantity of labour out of a smaller, rather than a greater number of labourers, if the cost is about the same. The more extended the scale of production, the stronger this motive. Its force increases with the accumulation of capital. His argument is that as capitalism develops, the will increase, which means that the mass of grows faster than the mass of.

Fewer workers can produce all that is necessary for society's requirements. In addition, capital will become more concentrated and centralised in fewer hands. This being the absolute historical tendency, part of the working population will tend to become surplus to the requirements of over time. Paradoxically, the larger the wealth of society, the larger the industrial reserve army will become. Marx called it 'the antagonism of capital accumulation' and he cites his, (Chapter 2, Section 1) to explain this phenomenon in relation with. One could add that the larger the wealth of society, the more people it can support who do not work. However, as Marx develops the argument further, it also becomes clear that, depending on the state of the economy, the reserve army of labour will either expand or contract, alternately being absorbed or expelled from the employed workforce.

Taking them as a whole, the general movements of are exclusively regulated by the expansion and contraction of the industrial reserve army, and these again correspond to the periodic changes of the industrial cycle. They are, therefore, not determined by the variations of the absolute number of the working population, but by the varying proportions in which the working-class is divided into active and reserve army, by the increase or diminution in the relative amount of the surplus-population, by the extent to which it is now absorbed, now set free. In recent years, there has been growing research on the concept of 'the ', to describe a growing reliance on temporary, part-time workers with precarious status, who share aspects of the proletariat and the reserve army of labor. Precarious workers do work part-time or full-time in temporary jobs, but they cannot really earn enough to live on, and depend partly on friends or family, or on state benefits, to survive. Typically they do not become truly 'unemployed', but they don't have a stable job to go to either. The rise of 'the precariat' has been attributed to the emergence of global. Although non-employed people who are unable or uninterested in performing legal paid work are not considered among the 'unemployed', the concept of 'conjunctural unemployment' is used in economics nowadays.

Economists often distinguish between short-term 'frictional' or 'cyclical' unemployment, and longer-term 'structural unemployment'. Sometimes there is a short-term mismatch between the demand and supply of labour, at other times there is much less total demand for labour than supply for a long-time. If no possibility for getting a job at all in the foreseeable future exists, many younger people decide to migrate or emigrate to a place where they can find work.

Composition of the relative surplus population [ ] Marx discusses the army of labor and the reserve army in Capital, Ch. 25, Section IV. The Army of Labor consists in those working-class people employed in average or better than average jobs. Not every one in the working class gets one of these jobs. There are then four other categories where members of the working class might find themselves: the 'stagnant pool', the floating reserves, the latent reserve, and pauperdom. Finally, people may leave the army and the reserve army by turning to criminality, and Marx refers to such people as 'lumpenproletariat'.

• The stagnant part consists of marginalised people with 'extremely irregular employment'. Stagnant pool jobs are characterized by below average pay, dangerous working conditions, they may be temporary. Those caught in the stagnant pool have jobs, so the modern definition of the employed would include both the army of labor plus the stagnant pool.

However, they are constantly on the lookout for something better. The modern unemployed would refer primarily to the floating reserve, people who used to have good jobs, but are now out of work. They certainly hope that their unemployment is temporary ('conjunctural unemployment'), but they are well aware that they could fall into the stagnant pool or the pauper class. • The latent part consists of that segment of the population not yet fully integrated into capitalist production. In Marx' day, he was referring to people living off of subsistence agriculture who were looking for monetary employment in industry.

In modern times, people coming from slums in developing countries where they survive largely by non-monetary means, to developed cities where they work for pay might form the latent. Housewives who move from unpaid to paid employment for a business could also form a part of the latent reserve. They are not unemployed, because they are not necessarily actively looking for a job; but if capital needs extra workers, it can pull them out of the latent reserve. In this sense, the latent forms a reservoir of potential workers for industries. • Pauperdom is where one might end up. The homeless is the modern term for paupers.

Marx calls them people who cannot adapt to capital's never ending change. For Karl Marx, 'the sphere of pauperism', including those still able to work, orphans and pauper children, and the 'demoralised and ragged' or 'unable to work'. As a mode of production [ ]. Further information: In Karl Marx' critique of political economy and subsequent Marxian analyses, the capitalist mode of production refers to the systems of organising production and distribution within capitalist. Private money-making in various forms (renting, banking, merchant trade, production for profit, etc.) preceded the development of the capitalist mode of production as such. The capitalist mode of production proper, based on wage-labour and private ownership of the means of production, and on industrial technology, began to grow rapidly in Western Europe from the, later extending to most of the world. [ ] The term capitalist mode of production is defined by of the, extraction of by the owning class for the purpose of,, and, at least as far as are concerned, being.

Capitalism in the form of money-making activity has existed in the shape of merchants and money-lenders who acted as intermediaries between consumers and producers engaging in (hence the reference to ') since the beginnings of civilisation. What is specific about the “capitalist mode of production” is that most of the inputs and outputs of are supplied through the market (i.e. They are commodities) and essentially all production is in this mode. For example, in flourishing Feudalism, most or all of the factors of production including labour are owned by the feudal ruling class outright and the products may also be consumed without a market of any kind, it is production for use within the feudal social unit and for limited trade. This has the important consequence that the whole organisation of the production process is reshaped and re-organised to conform with economic by capitalism, which is expressed in price relationships between inputs and outputs (wages, non-labour factor costs, sales, profits) rather than the larger rational context faced by society overall. That is, the whole process is organised and re-shaped in order to conform to “commercial logic”. Essentially, capital accumulation comes to define economic rationality in capitalist production.

A society, region or is capitalist if the predominant source of incomes and products being distributed is capitalist activity, but even so this does not yet mean necessarily that the capitalist mode of production is dominant in that society. Wage labour [ ]. An industrial amidst heavy steel (Kinex Bearings,,, c. 1995–2000) refers to the sale of under a formal or informal to an. These transactions usually occur in a where are market determined.

Individuals who possess and supply financial capital or labor to productive ventures often become owners, either jointly (as ) or individually. In Marxist economics these owners of the means of production and suppliers of capital are generally called capitalists. The description of the role of the capitalist has shifted, first referring to a useless intermediary between producers to an employer of producers, and eventually came to refer to owners of the means of production. Includes all physical and mental human resources, including entrepreneurial capacity and management skills, which are needed to produce products and services. Is the act of making goods or services by applying.

Critics of the capitalist mode of production see wage labour as a major, if not defining, aspect of hierarchical industrial systems. Most opponents of the institution support and as alternatives to both wage labour and to capitalism. While most opponents of the wage system blame the capitalist owners of the means of production for its existence, most and other also hold the state as equally responsible as it exists as a tool utilised by capitalists to subsidise themselves and protect the institution of. As some opponents of wage labour take influence from Marxist propositions, many are opposed to, but maintain respect for. Types [ ] The most common form of wage labour currently is ordinary direct, or 'full-time', employment in which a free worker sells his or her labour for an indeterminate time (from a few years to the entire career of the worker), in return for a money-wage or salary and a continuing relationship with the employer which it does not in general offer contractors or other irregular staff.

However, wage labour takes many other forms, and explicit as opposed to implicit (i.e. Conditioned by local labour and tax law) contracts are not uncommon.

Economic history shows a great variety of ways in which labour is traded and exchanged. The differences show up in the form of: • Employment status: a worker could be employed full-time, part-time, or on a casual basis.

He or she could be employed for example temporarily for a specific project only, or on a permanent basis. Part-time wage labour could combine with part-time. The worker could be employed also as an.

• Civil (legal) status: the worker could for example be a free citizen, an, the subject of (including some prison or army labour); a worker could be assigned by the political authorities to a task, they could be a or a bound to the land who is hired out part of the time. So the labour might be performed on a more or less voluntary basis, or on a more or less involuntary basis, in which there are many gradations. • Method of payment (remuneration or ). The work done could be paid 'in cash' (a money-wage) or 'in kind' (through receiving goods and/or services), or in the form of ' where the wage is directly dependent on how much the worker produces.

In some cases, the worker might be paid in the form of credit used to buy goods and services, or in the form of or in an enterprise. • Method of hiring: the worker might engage in a labour-contract on his or her own initiative, or he or she might hire out their labour as part of a group. But he or she may also hire out their labour via an intermediary (such as an employment agency) to a third party. In this case, he or she is paid by the intermediary, but works for a third party which pays the intermediary. In some cases, labour is several times, with several intermediaries.

Another possibility is that the worker is assigned or posted to a job by a political authority, or that an agency hires out a worker to an enterprise together with. Comparison to slavery [ ]. Escort strikebreakers in Buchtel, Ohio, 1884 Wage labour has long been compared to slavery. As a result, the phrase is often utilised as a pejorative for wage labour. Similarly, advocates of slavery looked upon the 'comparative evils of Slave Society and of Free Society, of slavery to human Masters and slavery to Capital', and proceeded to argue that wage slavery was actually worse than.

Slavery apologists like contended that workers only accepted wage labour with the passage of time, as they became 'familiarised and inattentive to the infected social atmosphere they continually inhale'. Scholars have debated the exact relationship between wage labor, slavery, and capitalism at length, especially for the antebellum United States. Similarities between wage labour and slavery were noted as early as in Ancient Rome. With the advent of the, thinkers such as and elaborated the comparison between wage labour and slavery in the context of a critique of societal property not intended for active personal use, while emphasised the brought about by machines. Before the, Southern defenders of slavery invoked the concept of wage slavery to favorably compare the condition of their slaves to workers in the North. The United States abolished slavery during the Civil War, but labor union activists found the metaphor useful. According to, in the 'references abounded in the labor press, and it is hard to find a speech by a labour leader without the phrase'.

” According to, analysis of the psychological implications of wage slavery goes back to the era. In his 1791 book On the Limits of State Action, classical thinker explained how 'whatever does not spring from a man's free choice, or is only the result of instruction and guidance, does not enter into his very nature; he does not perform it with truly human energies, but merely with mechanical exactness' and so when the labourer works under external control, 'we may admire what he does, but we despise what he is'. Both the and have been found useful in the psychological study of wage-based workplace relations. Additionally, as per anthropologist, the earliest wage labour contracts we know about were in fact contracts for the rental of chattel slaves (usually the owner would receive a share of the money, and the slave, another, with which to maintain his or her living expenses.) Such arrangements, according to Graeber, were quite common in New World slavery as well, whether in the United States or Brazil. Argued in that most of the techniques of human organisation employed on factory workers during the industrial revolution were first developed on slave plantations.

Main articles: and Market failure occurs when an is present and a market will often either under-produce a product with a positive externalisation or overproduce a product that generates a negative externalisation. Air pollution, for instance, is a negative externalisation that cannot be easily incorporated into markets as the world's air is not owned and then sold for use to polluters. So, too much pollution could be emitted and people not involved in the production pay the cost of the pollution instead of the firm that initially emitted the air pollution. Critics of market failure theory, like,, and argue that government programs and policies also fall short of absolute perfection. While all nations currently have some kind of market regulations, the desirable degree of regulation is disputed. [ ] Anti-competitive practices [ ]. Further information: The refers to the process of 'making money', or growing an initial sum of money through investment in production.

Capitalism is based around the accumulation of capital, whereby is invested in order to make a profit and then reinvested into further production in a continuous process of accumulation. In Marxian economic theory, this dynamic is called the. Capital accumulation forms the basis of capitalism, where economic activity is structured around the accumulation of, defined as investment in order to realize a financial profit. In this context, 'capital' is defined as money or a financial asset invested for the purpose of making more money (whether in the form of profit, rent, interest, royalties, capital gain or some other kind of return). In, and, capital accumulation is often equated with of profit income or savings, especially in capital goods.

The concentration and centralisation of capital are two of the results of such accumulation. In modern and the phrase is often used in preference to 'accumulation', though the (UNCTAD) refers nowadays to 'accumulation'. The phrase [ ] is occasionally used in. Background [ ] Accumulation can be measured as the monetary value of investments, the amount of income that is reinvested, or as the change in the value of assets owned (the increase in the value of the capital stock).

Using company, data and direct as a basis, government statisticians estimate total investments and assets for the purpose of, national and statistics. Usually the and the provide interpretations and analysis of this data. Standard indicators include,,, household asset wealth, and. Organisations such as the, the UNCTAD, the, the, and the used national investment data to estimate world trends.

The, and the Japan Statistical Office provide data on the United States, Europe and Japan respectively. Other useful sources of investment information are business magazines such as,,,, etc., and various corporate ' organisations and publications.

A reputable scientific journal is the Review of Income & Wealth. In the case of the United States, the 'Analytical Perspectives' document (an annex to the yearly budget) provides useful wealth and capital estimates applying to the whole country. In ' economic theory, capital accumulation refers to the operation whereby profits are reinvested increasing the total quantity of capital. Capital is viewed by Marx as expanding value, that is, in other terms, as a sum of capital, usually expressed in money, that is transformed through human labor into a larger value, extracted as profits and expressed as money.

Here, capital is defined essentially as economic or commercial asset in search of additional value. This requires property relations which enable objects of value to be appropriated and owned, and trading rights to be established. Capital accumulation has a double origin, namely in trade and in, both of a legal or illegal kind.

The reason is that a stock of capital can be increased through a process of exchange or 'trading up' but also through directly taking an asset or resource from someone else, without compensation. The continuation and progress of capital accumulation depends on the removal of obstacles to the expansion of trade, and this has historically often been a violent process. As markets expand, more and more new opportunities develop for accumulating capital, because more and more types of goods and services can be traded in. But capital accumulation may also confront resistance, when people refuse to sell, or refuse to buy (for example a by investors or workers, or ). Concentration and centralisation [ ] According to Marx, capital has the tendency for concentration and centralization in the hands of the wealthy. Marx explains: 'It is concentration of capitals already formed, destruction of their individual independence, expropriation of capitalist by capitalist, transformation of many small into few large capitals. Capital grows in one place to a huge mass in a single hand, because it has in another place been lost by many.

The battle of competition is fought by cheapening of commodities. The cheapness of commodities demands, caeteris paribus, on the productiveness of labour, and this again on the scale of production. Therefore, the larger capitals beat the smaller. It will further be remembered that, with the development of the capitalist mode of production, there is an increase in the minimum amount of individual capital necessary to carry on a business under its normal conditions. The smaller capitals, therefore, crowd into spheres of production which Modern Industry has only sporadically or incompletely got hold of. Here competition rages.

It always ends in the ruin of many small capitalists, whose capitals partly pass into the hands of their conquerors, partly vanish.' The rate of accumulation [ ] In, the rate of accumulation is defined as (1) the value of the real net increase in the of capital in an accounting period, (2) the proportion of realised or profit-income which is reinvested, rather than consumed.

This rate can be expressed by means of various ratios between the original capital outlay, the realised turnover, surplus-value or profit and reinvestments (see, e.g., the writings of the economist ). Other things being equal, the greater the amount of profit-income that is disbursed as personal earnings and used for consumptive purposes, the lower the savings rate and the lower the rate of accumulation is likely to be. However, earnings spent on consumption can also stimulate market demand and higher investment. This is the cause of endless controversies in economic theory about 'how much to spend, and how much to save'. El Precio Dela Soledad Mp3 Download.

In a boom period of capitalism, the growth of investments is cumulative, i.e. One investment leads to another, leading to a constantly expanding market, an expanding, and an increase in the standard of living for the majority of the people. In a stagnating, decadent capitalism, the accumulation process is increasingly oriented towards investment on military and security forces, real estate, financial speculation, and luxury consumption. In that case, income from production will decline in favour of interest, rent and tax income, with as a corollary an increase in the level of permanent unemployment. The more capital one owns, the more capital one can also borrow. The inverse is also true, and this is one factor in the widening gap between the rich and the poor.

Emphasised that the rhythm of capital accumulation and growth depended critically on (1) the division of a society's social product between ' and ', and (2) the division of the surplus product between and. In turn, this allocation pattern reflected the outcome of among capitalists, competition between capitalists and workers, and competition between workers.

The pattern of capital accumulation can therefore never be simply explained by commercial factors, it also involved social factors and relationships. The circuit of capital accumulation from production [ ] Strictly speaking, capital has accumulated only when realised income has been reinvested in capital assets. But the process of capital accumulation in has, as suggested in the first volume of Marx', at least seven distinct but linked moments: • The initial investment of (which could be borrowed capital) in and. • The command over and its appropriation. • The (increase in value) of capital through production of new outputs.

• The appropriation of the new output produced by employees, containing the added value. • The realisation of through output sales. • The appropriation of realised surplus-value as (profit) income after deduction of costs.

• The reinvestment of profit income in production. All of these moments do not refer simply to an 'economic' or commercial process. Rather, they assume the existence of legal, social, cultural and economic power conditions, without which creation, distribution and circulation of the new wealth could not occur. This becomes especially clear when the attempt is made to create a market where none exists, or where people refuse to trade.

Simple and expanded reproduction [ ] In volume 2 of Das Kapital, Marx continues the story and shows that, with the aid of bank, capital in search of growth can more or less smoothly mutate from one form to another, alternately taking the form of money capital (liquid deposits, securities, etc.), commodity capital (tradable products, real estate etc.), or production capital ( and labor power). His discussion of the simple and expanded of the conditions of production offers a more sophisticated model of the parameters of the accumulation process as a whole. At simple reproduction, a sufficient amount is produced to sustain society at the given; the stock of capital stays constant. At expanded reproduction, more product-value is produced than is necessary to sustain society at a given living standard (a ); the additional product-value is available for investments which enlarge the scale and variety of production. The bourgeois claim there is no according to which capital is necessarily re-invested in the expansion of production, that such depends on anticipated profitability, market expectations and perceptions of investment risk. Such statements only explain the subjective experiences of investors and ignore the objective realities which would influence such opinions. As Marx states in Vol.

2, simple reproduction only exists if the variable and surplus capital realised by Dept. 1 – producers of means of production – exactly equals that of the constant capital of Dept. 2, producers of articles of consumption (p. 524). Such equilibrium rests on various assumptions, such as a constant labor supply (no population growth).

Accumulation does not imply a necessary change in total magnitude of value produced but can simply refer to a change in the composition of an industry (p. 514). Introduced the additional concept of contracted economic reproduction, i.e. Reduced accumulation where business operating at a loss outnumbers growing business, or economic reproduction on a decreasing scale, for example due to wars, natural disasters or de. Balanced requires that different factors in the accumulation process expand in appropriate proportions. But markets themselves cannot spontaneously create that balance, in fact what drives business activity is precisely the imbalances between: inequality is the motor of growth. This partly explains why the worldwide pattern of economic growth is very uneven and unequal, even although markets have existed almost everywhere for a very long-time.

Some people argue that it also explains government regulation of market trade and. Capital accumulation as social relation [ ] 'Accumulation of capital' sometimes also refers in Marxist writings to the reproduction of capitalist (institutions) on a larger scale over time, i.e., the expansion of the size of the and of the wealth owned by the. This interpretation emphasises that capital ownership, predicated on command over labor, is a social relation: the growth of capital implies the growth of the (a '). In the first volume of Das Kapital Marx had illustrated this idea with reference to 's theory of colonisation: Wakefield discovered that in the Colonies, property in money, means of subsistence, machines, and other means of production, does not as yet stamp a man as a capitalist if there be wanting the correlative – the wage-worker, the other man who is compelled to sell himself of his own free-will. He discovered that capital is not a thing, but a social relation between persons, established by the instrumentality of things. Peel, he moans, took with him from England to Swan River, West Australia, means of subsistence and of production to the amount of £50,000. Peel had the foresight to bring with him, besides, 3,000 persons of the working-class, men, women, and children.

Once arrived at his destination, 'Mr. Peel was left without a servant to make his bed or fetch him water from the river.' Peel, who provided for everything except the export of English modes of production to Swan River! The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with at each price (demand D): the diagram shows a positive shift in demand from D 1 to D 2, resulting in an increase in price (P) and quantity sold (Q) of the product In capitalist economic structures, supply and demand is an of in a. It concludes that in a, the for a particular will vary until it settles at a point where the quantity demanded by consumers (at current price) will equal the quantity supplied by producers (at current price), resulting in an for price and.

The four basic laws of and are:: 37 • If demand increases (demand curve shifts to the right) and supply remains unchanged, then a shortage occurs, leading to a higher equilibrium price. • If demand decreases (demand curve shifts to the left) and supply remains unchanged, then a surplus occurs, leading to a lower equilibrium price. • If demand remains unchanged and supply increases (supply curve shifts to the right), then a surplus occurs, leading to a lower equilibrium price. • If demand remains unchanged and supply decreases (supply curve shifts to the left), then a shortage occurs, leading to a higher equilibrium price. Graphical representation of supply and demand [ ] Although it is normal to regard the quantity demanded and the quantity supplied as of the price of the goods, the standard graphical representation, usually attributed to, has price on the vertical axis and quantity on the horizontal axis, the opposite of the standard convention for the representation of a mathematical function. Since determinants of supply and demand other than the price of the goods in question are not explicitly represented in the supply-demand diagram, changes in the values of these variables are represented by moving the supply and demand curves (often described as 'shifts' in the curves). By contrast, responses to changes in the price of the good are represented as movements along unchanged supply and demand curves.

Supply schedule [ ] A supply schedule is a table that shows the relationship between the price of a good and the quantity supplied. Under the assumption of, supply is determined. That is: firms will produce additional output while the cost of producing an extra unit of output is less than the price they would receive. A hike in the cost of raw goods would decrease supply, shifting costs up, while a discount would increase supply, shifting costs down and hurting producers as producer surplus decreases.

By its very nature, conceptualising a supply curve requires the firm to be a perfect competitor (i.e. To have no influence over the market price). This is true because each point on the supply curve is the answer to the question 'If this firm is faced with this potential price, how much output will it be able to and willing to sell?'

If a firm has market power, its decision of how much output to provide to the market influences the market price, therefore the firm is not 'faced with' any price, and the question becomes less relevant. Economists distinguish between the supply curve of an individual firm and between the market supply curve. The market supply curve is obtained by summing the quantities supplied by all suppliers at each potential price. Thus, in the graph of the supply curve, individual firms' supply curves are added horizontally to obtain the market supply curve.

Economists also distinguish the short-run market supply curve from the long-run market supply curve. In this context, two things are assumed constant by definition of the short run: the availability of one or more fixed inputs (typically ), and the number of firms in the industry. In the long-run, firms can adjust their holdings of physical capital, enabling them to better adjust their quantity supplied at any given price. Furthermore, in the long-run potential competitors can or exit the industry in response to market conditions.

For both of these reasons, long-run market supply curves are generally flatter than their short-run counterparts. The determinants of supply are: • Production costs: how much a goods costs to be produced. Production costs are the cost of the inputs; primarily labor, capital, energy and materials. They depend on the technology used in production, and/or technological advances. • Firms' expectations about future prices.

• Number of suppliers. Demand schedule [ ] A demand schedule, depicted graphically as the, represents the amount of some that buyers are willing and able to purchase at various prices, assuming all determinants of demand other than the price of the good in question, such as income, tastes and preferences, the price of, and the price of, remain the same. Following the, the demand curve is almost always represented as downward-sloping, meaning that as price decreases, consumers will buy more of the good.

Just like the supply curves reflect curves, demand curves are determined by curves. Consumers will be willing to buy a given quantity of a good, at a given price, if the marginal utility of additional consumption is equal to the determined by the price, that is the marginal utility of alternative consumption choices.

The demand schedule is defined as the willingness and ability of a consumer to purchase a given product in a given frame of time. While the aforementioned demand curve is generally downward-sloping, there may be rare examples of goods that have upward-sloping demand curves. Two different hypothetical types of goods with upward-sloping demand curves are (an inferior but good) and (goods made more fashionable by a higher price). By its very nature, conceptualising a demand curve requires that the purchaser be a perfect competitor – that is, that the purchaser has no influence over the market price.

This is true because each point on the demand curve is the answer to the question 'If this buyer is faced with this potential price, how much of the product will it purchase?' If a buyer has market power, so its decision of how much to buy influences the market price, then the buyer is not 'faced with' any price, and the question is meaningless. Like with supply curves, economists distinguish between the demand curve of an individual and the market demand curve. The market demand curve is obtained by summing the quantities demanded by all consumers at each potential price.

Thus, in the graph of the demand curve, individuals' demand curves are added horizontally to obtain the market demand curve. The determinants of demand are: • Income. • Tastes and preferences.

• Prices of related goods and services. • Consumers' expectations about future prices and incomes that can be checked. • Number of potential consumers. Equilibrium [ ]. Further information: In the context of supply and demand, economic equilibrium refers to a state where economic forces such as are balanced and in the absence of external influences the () values of economic variables will not change.

For example, in the standard text-book model of, equilibrium occurs at the point at which quantity demanded and quantity supplied are equal. Market equilibrium in this case refers to a condition where a market price is established through competition such that the amount of goods or services sought by is equal to the amount of goods or services produced. This price is often called the competitive price or price and will tend not to change unless demand or supply changes and the quantity is called 'competitive quantity' or market clearing quantity. Partial equilibrium [ ]. Main article: Partial equilibrium, as the name suggests, takes into consideration only a part of the market to attain equilibrium. Jain proposes (attributed to ): 'A partial equilibrium is one which is based on only a restricted range of data, a standard example is price of a single product, the prices of all other products being held fixed during the analysis.' The supply-and-demand model is a partial equilibrium model of, where the clearance on the of some specific is obtained independently from prices and quantities in other markets.

In other words, the prices of all and, as well as levels of are constant. This makes analysis much simpler than in a model which includes an entire economy. Here the dynamic process is that prices adjust until supply equals demand. It is a powerfully simple technique that allows one to study, and.

The stringency of the simplifying assumptions inherent in this approach make the model considerably more tractable, but may produce results which while seemingly precise do not effectively model real world economic phenomena. Partial equilibrium analysis examines the effects of policy action in creating equilibrium only in that particular sector or market which is directly affected, ignoring its effect in any other market or industry assuming that they being small will have little impact if any. Hence this analysis is considered to be useful in constricted markets. First formalised the idea of a one-period economic equilibrium of the general economic system, but it was French economist and English political economist who developed tractable models to analyse an economic system.

Empirical estimation [ ] Demand and supply relations in a market can be statistically estimated from price, quantity, and other with sufficient information in the model. This can be done with methods of estimation in. Such methods allow solving for the model-relevant 'structural coefficients', the estimated algebraic counterparts of the theory. The is a common issue in 'structural estimation'. Typically, data on variables (that is: variables other than price and quantity, both of which are variables) are needed to perform such an estimation.

An alternative to 'structural estimation' is estimation, which regresses each of the endogenous variables on the respective exogenous variables. Macroeconomic uses of demand and supply [ ] Demand and supply have also been generalised to explain variables in a, including the and the general. The may be the most direct application of supply and demand to macroeconomics, but other macroeconomic models also use supply and demand.

Compared to uses of demand and supply, different (and more controversial) theoretical considerations apply to such counterparts as and. Demand and supply are also used in macroeconomic theory to relate and money demand to, and to relate labor supply and labor demand to wage rates. History [ ] According to Hamid S.

Hosseini, the power of supply and demand was understood to some extent by several early Muslim scholars, such as fourteenth-century scholar, who wrote: 'If desire for goods increases while its availability decreases, its price rises. On the other hand, if availability of the good increases and the desire for it decreases, the price comes down.' 's 1691 work Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of Money. Includes an early and clear description of supply and demand and their relationship. In this description demand is: 'The price of any commodity rises or falls by the proportion of the number of buyer and sellers” and “that which regulates the price. [of goods] is nothing else but their quantity in proportion to their rent'. The phrase 'supply and demand' was first used by in his Inquiry into the Principles of Political Economy, published in 1767.

Used the phrase in his 1776 book, and titled one chapter of his 1817 work 'On the Influence of Demand and Supply on Price'. In The Wealth of Nations, Smith generally assumed that the supply price was fixed but that its 'merit' (value) would decrease as its 'scarcity' increased, in effect what was later called the law of demand also. Ricardo, in Principles of Political Economy and Taxation, more rigorously laid down the idea of the assumptions that were used to build his ideas of supply and demand. First developed a mathematical model of supply and demand in his 1838 Researches into the Mathematical Principles of Wealth, including diagrams. During the late 19th century the marginalist school of thought emerged. This field mainly was started by,, and.

The key idea was that the price was set by the most expensive price, that is, the price at the margin. This was a substantial change from Adam Smith's thoughts on determining the supply price.

In his 1870 essay 'On the Graphical Representation of Supply and Demand', in the course of 'introduc[ing] the diagrammatic method into the English economic literature' published the first drawing of supply and demand curves therein, including from a shift of supply or demand and application to the labor market. The model was further developed and popularized by in the 1890 textbook. Capitalism and war [ ] War typically causes the diversion, destruction and creation of capital assets as capital assets are both destroyed or consumed and diverted to types of production needed to fight the war. Many assets are wasted and in some few cases created specifically to fight a war. War driven demands may be a powerful stimulus for the accumulation of capital and production capability in limited areas and market expansion outside the immediate theatre of war. Often this has induced laws against perceived and real.

The total hours worked in the United States rose by 34 percent during World War II, even though the military draft reduced the civilian labor force by 11 percent. Assembling the North American at, 1942: the common view among economic historians is that the ended with the advent of World War II War destruction can be illustrated by looking. Industrial war damage was heaviest in Japan, where 1/4 of factory buildings and 1/3 of plant & equipment were destroyed; 1/7 of electric power-generating capacity was destroyed and 6/7 of oil refining capacity. The Japanese merchant fleet lost 80% of their ships. In Germany in 1944, when air attacks were heaviest, 6.5% of machine tools were damaged or destroyed, but around 90% were later repaired.

About 10% of steel production capacity was lost. In Europe, the United States and the Soviet Union enormous resources were accumulated and ultimately dissipated as planes, ships, tanks, etc. Were built and then lost or destroyed. Germany's total war damage was estimated at about 17.5% of the pre-war total capital stock by value, i.e. In the area alone, there were 8 million refugees lacking basic necessities. In 1945, less than 10% of the railways were still operating. 2395 rail bridges were destroyed and a total of 7500 bridges, 10,000 locomotives and more than 100,000 goods wagons were destroyed.

Less than 40% of the remaining locomotives were operational. However, by the first quarter of 1946 European rail traffic, which was given assistance and preferences (by western appointed military governors) for resources and material as an essential asset, regained its prewar operational level. At the end of the year, 90% of Germany's railway lines were operating again. In retrospect, the rapidity of infrastructure reconstruction appears astonishing.

Initially, in May 1945 newly installed United States president 's directive had been that no steps would be taken towards economic rehabilitation of Germany. In fact, the initial industry plan of 1946 prohibited production in excess of half of the 1938 level; the iron and steel industry was allowed to produce only less than a third of pre-war output.

These plans were rapidly revised and better plans were instituted. In 1946, over 10% of Germany's physical capital stock (plant & equipment) was also dismantled and confiscated, most of it going to the USSR. By 1947, industrial production in Germany was at 1/3 of the 1938 level, and industrial investment at about 1/2 the 1938 level. The first big strike-wave in the occurred in early 1947 – it was about food rations and housing, but soon there were demands for nationalisation. The United States appointed military governor (Newman) however stated at the time that he had the power to break strikes by withholding food rations. The clear message was: 'no work, no eat'. As the military controls in Western Germany were nearly all relinquished and the Germans were allowed to rebuild their own economy with Marshall Plan aid things rapidly improved.

By 1951, German industrial production had overtaken the prewar level. The funds were important, but, after the currency reform (which permitted German capitalists to revalue their assets) and the establishment of a new political system, much more important was the commitment of the United States to rebuilding German capitalism and establishing a free market economy and government, rather than keeping Germany in a weak position. Initially, average remained low, lower even than in 1938, until the early 1950s, while profitability was unusually high. So the total investment fund, aided by credits, was also high, resulting in a high rate of capital accumulation which was nearly all reinvested in new construction or new tools. This was called the or 'Wirtschaftswunder'.

In Italy, the victorious Allies did three things in 1945: they imposed their absolute military authority; they quickly disarmed the Italian partisans from a very large stock of weapons; and they agreed to a state guarantee of wage payments, as well as a veto on all sackings of workers from their jobs. Although the Italian Communist Party grew very large immediately after the war ended – it achieved a membership of 1.7 million people in a population of 45 million – it was outmaneouvred through a complicated political battle by the Christian Democrats, after three years. In the 1950s, an economic boom began in Italy, at first fuelled by internal demand, and then also by exports. In modern times, it has often been possible to rebuild physical capital assets destroyed in wars completely within the space of about 10 years, except in cases of severe pollution by or other kinds of irreparable devastation.

However, damage to has been much more devastating, in terms of fatalities (in the case of World War II, about 55 million deaths), permanent physical disability, enduring ethnic hostility and psychological injuries which have effects for at least several generations. Types of capitalism [ ] There are many variants of capitalism in existence that differ according to country and region.

They vary in their institutional makeup and by their economic policies. The common features among all the different forms of capitalism is that they are based on the production of goods and services for profit, predominantly market-based allocation of resources, and they are structured upon the accumulation of capital. The major forms of capitalism are listed hereafter: Advanced capitalism [ ]. Main article: Advanced capitalism is the situation that pertains to a society in which the has been integrated and developed deeply and extensively for a prolonged period. Various writers identify as an influential early theorist of advanced capitalism, even if he did not use the term himself. In his writings Gramsci sought to explain how capitalism had adapted to avoid the revolutionary overthrow that had seemed inevitable in the 19th century. At the heart of his explanation was the decline of raw coercion as a tool of class power, replaced by use of institutions to manipulate public ideology in the capitalists' favour.

Has been a major contributor to the analysis of advanced-capitalistic societies. Habermas observed four general features that characterise advanced capitalism: • Concentration of industrial activity in a few large firms • Constant reliance on the state to stabilise the economic system • A formally democratic government that legitimises the activities of the state and dissipates opposition to the system • The use of nominal wage increases to pacify the most restless segments of the work force Finance capitalism [ ]. See also: In their critique of capitalism, and both emphasise the role of ' as the determining and interest in capitalist society, particularly in the. Is credited [ ] with first bringing the term 'finance capitalism' into prominence through Finance Capital, his 1910 study of the links between German trusts, banks, and monopolies – a study subsumed by into (1917), his analysis of the imperialist relations of the great world powers. Lenin concluded that the banks at that time operated as 'the chief nerve centres of the whole capitalist system of national economy': for the (founded in 1919), the phrase 'dictatorship of finance capitalism' became a regular one. Would later point to two earlier periods when finance capitalism had emerged in human history – with the Genoese in the 16th century and with the Dutch in the 17th and 18th centuries – although at those points it developed from commercial capitalism.

[ ] extended Braudel's analysis to suggest that a predominance of finance capitalism is a recurring, long-term phenomenon, whenever a previous phase of commercial/industrial capitalist expansion reaches a plateau. Mercantilism [ ]. The subscription room at in the early 19th century Mercantilism is a nationalist form of early capitalism that came into existence approximately in the late 16th century.

It is characterized by the intertwining of national business interests to state-interest and imperialism, and consequently, the state apparatus is utilized to advance national business interests abroad. An example of this is colonists living in America who were only allowed to trade with and purchase goods from their respective mother countries (e.g. Britain, Portugal, France). Mercantilism was driven by the belief that the wealth of a nation is increased through a positive balance of trade with other nations; it corresponds to the phase of capitalist development sometimes called the. Free-market economy [ ]. See also: and Free-market economy refers to a capitalist economic system where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy.

It typically entails support for highly competitive markets and private ownership of productive enterprises. Laissez-faire is a more extensive form of free-market economy where the role of the state is limited to protecting. Social-market economy [ ]. Main articles: and A social-market economy is a nominally free-market system where government intervention in price formation is kept to a minimum but the state provides significant services in the area of social security, unemployment benefits and recognition of through national arrangements.

This model is prominent in Western and Northern European countries, and Japan, albeit in slightly different configurations. The vast majority of enterprises are privately owned in this economic model. Refers to the contemporary model of capitalism and adaptation of the social market model that exists in continental Western Europe today. State capitalism [ ].

Main article: State capitalism is a capitalist market economy dominated by state-owned enterprises, where the state enterprises are organized as commercial, profit-seeking businesses. The designation has been used broadly throughout the 20th century to designate a number of different economic forms, ranging from state-ownership in market economies to the command economies of the former. According to Aldo Musacchio, a professor at Harvard Business School, state capitalism is a system in which governments, whether democratic or autocratic, exercise a widespread influence on the economy either through direct ownership or various subsidies. Musacchio notes a number of differences between today's state capitalism and its predecessors. In his opinion, gone are the days when governments appointed bureaucrats to run companies: the world's largest state-owned enterprises are now traded on the public markets and kept in good health by large institutional investors. Contemporary state capitalism is associated with the, and the economy of Norway. Alternatively, defines state capitalism as 'an economic system in which private capitalism is modified by a varying degree of government ownership and control'., in Socialism: Utopian and Scientific, argued that state-owned enterprises would characterize the final stage of capitalism, consisting of ownership and management of large-scale production and communication by the.

In his writings, characterized the economy of Soviet Russia as state capitalist, believing state capitalism to be an early step toward the development of socialism. Some economists and left-wing academics including and argue that the economies of the former and Eastern bloc represented a form of state capitalism because their internal organization within enterprises and the system of wage labor remained intact. The term is not used by Austrian school economists to describe state ownership of the means of production. The economist Ludwig von Mises argued that the designation of 'state capitalism' was simply a new label for the old labels of 'state socialism' and 'planned economy', and differed only in non-essentials from these earlier designations. The debate between proponents of private versus state capitalism is centered around questions of managerial efficacy, productive efficiency, and fair distribution of wealth. Corporate capitalism [ ]. See also: A mixed economy is a largely market-based economy consisting of both private and public ownership of the means of production and through macroeconomic policies intended to correct, reduce unemployment and keep inflation low.

The degree of intervention in markets varies among different countries. Some mixed economies, such as France under, also featured a degree of over a largely capitalist-based economy. Most modern capitalist economies are defined as 'mixed economies' to some degree. [ ] Racial capitalism [ ] In her article 'Racial Capitalism,' Nancy Leong defines racial capitalism as 'the process' that occurs when individuals or institutions profit 'from the racial identity of another person.'

Others [ ] Other variants of capitalism include. Further information:,, and In a capitalist system, the government does not prohibit private property or prevent individuals from working where they please. The government does not prevent firms from determining what wages they will pay and what prices they will charge for their products.

However, many countries have laws and minimum safety standards. Under some versions of capitalism, the government carries out a number of economic functions, such as issuing money, supervising public utilities and enforcing private contracts. Many countries have that prohibit monopolies and cartels from forming.

Despite anti-monopoly laws, large corporations can form near-monopolies in some industries. Such firms can temporarily drop prices and accept losses to prevent competition from entering the market, and then raise them again once the threat of entry is reduced. In many countries, public utilities (e.g. Electricity, heating fuel, communications) are able to operate as a monopoly under government regulation, due to high economies of scale.

Government agencies regulate the standards of service in many industries, such as airlines and broadcasting, as well as financing a wide range of programs. In addition, the government regulates the flow of capital and uses financial tools such as the interest rate to control factors such as inflation and unemployment. Adverse characteristics of capitalist governments [ ] argue that the role of the state in a capitalist society is to defend the interests of the. These governments take actions to implement such things as unified national markets, national currencies, and customs system.

Capitalist governments have also been criticised as in nature due to the inevitable inequality characteristic of economic progress. Criticism [ ]. The poster ' (1911) Critics of capitalism associate the economic system with; unfair and power;; repression of workers and;;;; and economic instability. Many socialists consider capitalism to be irrational, in that production and the direction of the economy are unplanned, creating many inconsistencies and internal contradictions. Capitalism and individual property rights have been associated with the where owners are unable to agree. Postulates that capitalist economies prioritize profits and capital accumulation over the social needs of communities, and capitalist enterprises rarely include the workers in the basic decisions of the enterprise. Some and scholars have argued that – by,, or other coerced persons – is compatible with capitalist relations.

Argued that unfree labor is acceptable to capital. Historian argues that capitalism has its origins in slavery: 'when historians talk about the Atlantic market revolution, they are talking about capitalism. And when they are talking about capitalism, they are talking about slavery.' Historian claims that slavery was an integral component in the violent development of American and global capitalism. According to, institutional racism has been 'one of the most significant pillars' of the capitalist system and serves as 'the ideological justification for the hierarchization of the work-force and its highly unequal distributions of reward'. Many aspects of capitalism have come under attack from the, which is primarily opposed to. Have argued that capitalism requires continual economic growth, and that it will inevitably deplete the finite natural resources of Earth and cause of animal and plant life.

Such critics argue that, while this or contemporary capitalism has indeed increased global trade, it has also destroyed traditional ways of life, exacerbated inequality and increased global – with more living today in abject poverty than before neoliberalism, and that environmental indicators indicate massive since the late 1970s. Some scholars blame the on the neoliberal capitalist model. Following the banking crisis of 2007, told the United States Congress on 23 October 2008: 'The whole intellectual edifice collapsed. I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders. I was shocked.' Many religions have criticized or opposed specific elements of capitalism. Traditional,, and Islam forbid, although alternative methods of banking have been developed.

Some Christians have criticized capitalism for its aspects and its inability to account for the wellbeing of all people. Many of Jesus' parables deal with economic concerns: farming, shepherding, being in debt, doing hard labor, being excluded from banquets and the houses of the rich, and have implications for wealth and power distribution. Catholic scholars and clergy have often criticized capitalism because of its disenfranchisement of the poor often promoting as an alternative. In his 84-page, described unfettered capitalism as 'a new tyranny' and called on world leaders to fight rising poverty and inequality: Some people continue to defend which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting.

Proponents of capitalism argue that it creates more prosperity than any other economic system, and that its benefits are mainly to the ordinary person. Critics of capitalism variously associate it with economic instability, an inability to provide for the well-being of all people, and an unsustainable danger to the natural environment.

Maintain that, although capitalism is superior to all previously existing economic systems (such as feudalism or slavery), the contradiction between class interests will only be resolved by advancing into a completely new social system of production and distribution in which all persons have an equal relationship to the means of production. The term capitalism in its modern sense is often attributed to. In his, Marx analysed the ' using a method of understanding today known as. However, Marx himself rarely used the term 'capitalism', while it was used twice in the more political interpretations of his work, primarily authored by his collaborator. In the 20th century, defenders of the capitalist system often replaced the term capitalism with phrases such as free enterprise and private enterprise and replaced capitalist with and in reaction to the negative connotations associated with capitalism. Profit motive [ ] The majority of criticisms against the profit motive centre on the idea that profits should not supersede the needs of people.

's film, for example, attacks the healthcare industry for its alleged emphasis on profits at the expense of patients. Moore explains: We should have no talk of profit when it comes to helping people who are sick. The profit motive should be nowhere involved in this.

And you know what? It's not fair to the insurance companies either because they have a fiduciary responsibility to make as much money as they can for their shareholders. Well, the way they make more money is to deny claims or to kick people off the rolls or to not even let people on the rolls because they have a pre-existing condition. You know, all of that is wrong. Another common criticism of the profit motive is that it is believed to encourage selfishness and greed.

Critics of the profit motive contend that companies disregard morals or public safety in the pursuit of profits. Economists counter that the profit motive, coupled with competition, actually reduces the final price of an item for consumption, rather than raising it. They argue that businesses profit by selling a good at a lower price and at a greater volume than the competition. Economist uses supermarkets as an example to illustrate this point: “It has been estimated that a supermarket makes a clear profit of about a penny on a dollar of sales.

If that sounds pretty skimpy, remember that it is collecting that penny on every dollar at several cash registers simultaneously and, in many cases, around the clock.” U.S. Economist has argued that greed and self-interest are. On a 1979 episode of, Friedman states: “The world runs on individuals pursuing their separate interests.” He continues by explaining that only in capitalist countries, where individuals can pursue their own self-interest, people have been able to escape from “grinding poverty”. Marxian responses [ ]. • • • Marx considered capitalism to be a historically specific (the way in which the productive property is owned and controlled, combined with the corresponding between individuals based on their connection with the process of production). The capitalist stage of development or ' society', for Marx, represented the most advanced form of social organization to date, but he also thought that the working classes would come to power in a worldwide or transformation of human society as the end of the series of first aristocratic, then capitalist, and finally working class rule was reached. Following, Marx distinguished the of commodities from their in the market.

Capital, according to Marx, is created with the purchase of commodities for the purpose of creating new commodities with an exchange value higher than the sum of the original purchases. For Marx, the use of had itself become a commodity under capitalism; the exchange value of labor power, as reflected in the wage, is less than the value it produces for the capitalist. This difference in values, he argues, constitutes, which the capitalists extract and accumulate. In his book, Marx argues that the is distinguished by how the owners of capital extract this surplus from workers – all prior class societies had extracted, but capitalism was new in doing so via the sale-value of produced commodities. He argues that a core requirement of a capitalist society is that a large portion of the population must not possess sources of self-sustenance that would allow them to be independent, and are instead forced to sell their labor for a wage. In conjunction with his criticism of capitalism was Marx's belief that the working class, due to its relationship to the means of production and numerical superiority under capitalism, would be the driving force behind the socialist revolution. This argument is intertwined with Marx' version of the arguing that labor is the source of all value, and thus of profit., in (1916), further developed Marxist theory and argued that capitalism necessarily led to and the export of capital – which he also called 'imperialism' – to find new markets and resources, representing the last and highest stage of capitalism.

Some 20th-century consider capitalism to be a social formation where capitalist class processes dominate, but are not exclusive. Capitalist class processes, to these thinkers, are simply those in which takes the form of, usable as capital; other tendencies for utilization of labor nonetheless exist simultaneously in existing societies where capitalist processes predominate. However, other late Marxian thinkers argue that a social formation as a whole may be classed as capitalist if capitalism is the mode by which a surplus is extracted, even if this surplus is not produced by capitalist activity, as when an absolute majority of the population is engaged in non-capitalist economic activity. In Limits to Capital (1982), outlines an overdetermined, 'spatially restless' capitalism coupled with the spatiality of crisis formation and resolution. Harvey used Marx's theory of crisis to aid his argument that capitalism must have its 'fixes' but that we cannot predetermine what fixes will be implemented, nor in what form they will be. His work on contractions of capital accumulation and international movements of capitalist modes of production and money flows has been influential. According to Harvey, capitalism creates the conditions for volatile and geographically uneven development Sociologists such as Ulrich Beck envisioned the society of risk as a new cultural value which saw risk as a commodity to be exchanged in globalized economies.

This theory suggested that disasters and capitalist economy were inevitably entwined. Disasters allow the introduction of economic programs which otherwise would be rejected, as well as decentralizing the class structure in production. Supply and demand [ ] At least two assumptions are necessary for the validity of the standard model: first, that supply and demand are independent; second, that supply is 'constrained by a fixed resource'. If these conditions do not hold, then the model cannot be sustained.

Critique focused on the inconsistency (except in implausible circumstances) of partial equilibrium analysis and the rationale for the upward slope of the supply curve in a market for a produced consumption good. The notability of Sraffa's critique is also demonstrated by 's comments and engagements with it over many years, for example: 'What a cleaned-up version of Sraffa (1926) establishes is how nearly empty are all of Marshall's partial equilibrium boxes. To a logical purist of Wittgenstein and Sraffa class, the Marshallian partial equilibrium box of constant cost is even more empty than the box of increasing cost.' Aggregate excess demand in a market is the difference between the quantity demanded and the quantity supplied as a function of price. In the model with an upward-sloping supply curve and downward-sloping demand curve, the aggregate excess demand function only intersects the axis at one point, namely, at the point where the supply and demand curves intersect.

The shows that the standard model cannot be rigorously derived in general from. The model of prices being determined by supply and demand assumes. But: 'economists have no adequate model of how individuals and firms adjust prices in a competitive model. If all participants are price-takers by definition, then the actor who adjusts prices to eliminate excess demand is not specified'. Goodwin, Nelson, Ackerman, and Weisskopf write: 'If we mistakenly confuse, then we might be misled into thinking that an explanation expressed in precise mathematical or graphical terms is somehow more rigorous or useful than one that takes into account particulars of history, institutions or business strategy. This is not the case.

Therefore, it is important not to put too much confidence in the apparent precision of supply and demand graphs. Supply and demand analysis is a useful precisely formulated conceptual tool that clever people have devised to help us gain an abstract understanding of a complex world. It does not – nor should it be expected to – give us in addition an accurate and complete description of any particular real world market.' Counter-criticisms [ ] Austrian School [ ] Austrian School economists have argued that capitalism can organise itself into a complex system without an external guidance or central planning mechanism.

Friedrich Hayek considered the phenomenon of as underpinning capitalism. Prices serve as a signal as to the urgent and unfilled wants of people, and the opportunity to earn profits if successful, or absorb losses if resources are used poorly or left idle, gives entrepreneurs to use their and resources to satisfy those wants. Thus the activities of millions of people, each seeking his own interest, are coordinated. Ayn Rand [ ] The novelist and philosopher made positive moral defenses of laissez-faire capitalism, most notably in her 1957 novel, and in her 1966 collection of essays. She argued that capitalism should be supported on moral grounds, not just on the basis of practical benefits.

Her ideas have had significant influence over conservative and supporters of capitalism, especially within the American. Rand defined capitalism as 'a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.' According to Rand, the role of government in a capitalist state has three broad categories of proper functions: First, the police 'to protect men from criminals'. Second, the armed services 'to protect men from foreign invaders'. Third, the law courts 'to settle disputes among men according to objective laws'. Economic growth [ ]. Capitalism and the economy of the People's Republic of China Many theorists and policymakers in predominantly capitalist nations have emphasized capitalism's ability to promote economic growth, as measured by (GDP),.

This argument was central, for example, to Adam Smith's advocacy of letting a free market control production and price, and allocate resources. Many theorists have noted that this increase in global GDP over time coincides with the emergence of the modern world capitalist system. Between 1000 and 1820, the world economy grew sixfold, a faster rate than the population growth, so individuals enjoyed, on average, a 50% increase in income. Between 1820 and 1998, world economy grew 50-fold, a much faster rate than the population growth, so individuals enjoyed, on average, a 9-fold increase in income. In most capitalist economic regions such as Europe, the United States, Canada, Australia and New Zealand, the economy grew 19-fold per person, even though these countries already had a higher starting level, and in Japan, which was poor in 1820, the increase per person was 31-fold. In the there was an increase, but only 5-fold per person. Economic freedom [ ] In his book, asserts that the of capitalism is a requisite of.

He argues that the market mechanism is the only way of deciding what to produce and how to distribute the items without using coercion., and also promoted this view. Friedman claimed that centralized economic operations are always accompanied. In his view, transactions in a market economy are voluntary, and that the wide diversity that voluntary activity permits is a fundamental threat to repressive political leaders and greatly diminish their power to coerce. Some of Friedman's views were shared by, who believed that capitalism is vital for freedom to survive and thrive., an American think tank that conducts international research on, and advocates for, democracy, political freedom, and human rights, has argued 'there is a high and statistically significant correlation between the level of political freedom and economic freedom.' See also [ ]. • Bacher, Christian (2007).. Munich: GRIN Verlag.

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