Economics Dictionary of ArgumentsHome
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| Relative price: Relative price in economics refers to the price of one good or service in comparison to another, often expressed as a ratio. It reflects the opportunity cost of choosing one item over another. Changes in relative prices influence consumer behavior, resource allocation, and the supply and demand for goods in the market. See also Price._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Piero Sraffa on Relative Price - Dictionary of Arguments
Harcourt I 135 Relative price/Sraffa/Harcourt: The following quote from Sraffa [1960](1), pp. 12-13, is a splendid intuitive example of why relative prices are now constant and independent of r. Sraffa: „Starting from the situation in which the whole of the national income goes to labour, we imagine wages to be reduced: a rate of profits will thereby arise. The key to the movement of relative prices consequent upon a change in the wage lies in the inequality of the proportions in which labour and means of production are employed in the various industries. It is clear that if the proportion were the same in all industries no price-changes could ensue, however great was the diversity of the commodity-composition of the means of production in different industries. For in each industry an equal deduction from the wage would yield just as much as was required for paying the profits on its means of production at a uniform rate without need to disturb the existing prices. For the same reason it is impossible for prices to remain unchanged when there is inequality of 'proportions'. Suppose that prices did remain unchanged when the wage was reduced and a rate of profits emerged. Since in any one industry what was saved by the wage-reduction would depend on the number of men employed, while what was needed for paying profits at a uniform rate would depend on the aggregate value of the means of production used, industries with a sufficiently low proportion of labour to means of production would have a deficit, while industries with a sufficiently high proportion would have a surplus, on their payments for wages and profits. >Reswitching/Economic theories, >Labour, >Value theory._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Sraffa I Piero Sraffa Production of Commodities by Means of Commodities. Prelude to a Critique of Economic Theory (Cambridge: Cambridge University Press). Cambridge 1960 Harcourt I Geoffrey C. Harcourt Some Cambridge controversies in the theory of capital Cambridge 1972 |
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