Gravitation of Market Prices towards Normal Prices: some New Results

Enrico Bellino, Franklin Serrano

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

The gravitation process of market prices towards production prices is here presented by means of an analytical framework where the classical capital mobility principle is coupled with a determination of the deviation of market from normal (natural) prices which closely follows the description provided by Adam Smith: each period the level of the market price of a commodity will be higher (lower) than its production price if the quantity brought to the market falls short (exceeds) the level of effectual demand. This approach also simplifies the results with respect to those obtained in cross-dual literature. Three versions of the model are here proposed: i) assuming a given level of aggregate employment; ii) assuming a sort of Say’s law; iii) and on the basis of an explicit adjustment of actual outputs to effectual demands. All these cases describe dynamics in which market prices can converge asymptotically towards production prices.
Original languageEnglish
Pages (from-to)25-64
Number of pages40
JournalContributions to Political Economy
Volume2018
DOIs
Publication statusPublished - 2018

Keywords

  • Market prices
  • classical competition
  • effectual demand
  • gravitation
  • normal prices

Fingerprint

Dive into the research topics of 'Gravitation of Market Prices towards Normal Prices: some New Results'. Together they form a unique fingerprint.

Cite this