Let us suppose that each consumer wants to buy an umbrella and that there are two different qualities available. Consumers are willing to pay Rs 75 for each high-quality umbrella and Rs 45 for each low-quality umbrella. It is impossible to tell the quality of umbrellas in store. This can only be determined after they are used. Let us suppose [...]
In this article we will discuss about the Marginal Rate of Technical Substitution (MRTS) between Two Variable Inputs. Let us suppose that the firm uses two variable inputs X and Y and the firm's production function is q = f(x, y) [eq (8.21)] Let us also suppose that it is possible for the firm to substitute one of the inputs [...]
The neoclassical theory of interest rate determination is named the loanable funds theory. The exponents of this theory are the neoclassical economists like Wicksell (1851-1926), Ohlin (1899-1979), Robertson( 1890-1963), Myrdal( 1898-1987), Lindahl and Viner (1892-1970). The loanable funds theory contends that the rate of interest is determined by the demand for and supply of loanable funds. Supply of Loanable Funds: [...]