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On the Reappraisal of Microeconomics

Economic Growth and Change in a Material World

Robert U. Ayres and Katalin Martinás

The conventional utility-based approach to microeconomics is now nearly a century old and although frequently criticised, it has yet to be replaced. On the Reappraisal of Microeconomics offers an alternative approach that overcomes most of the objections to orthodox theory, whilst offering some unique additional advantages.
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Appendix C: Explicit representations of value and wealth functions and supplyÂ…demand curves

Robert U. Ayres and Katalin Martinás


Appendix C: Explicit representations of value and wealth functions and supply–demand curves C.1 DERIVATION OF WEALTH FUNCTIONS In this Appendix we consider some possible explicit wealth and value functions for three cases. The first case might be a pure trader of general goods, such as a country store, for which market decisions concerning the ith good in stock are independent of the quantities of the other goods it has in stock. In other words, for this particular trader the subjective value of the ith good does not depend on the quantities of the other goods held in stock. The second case might also be a trader, except that it is the marginal contributions of stock changes to wealth that are assumed to be independent. We will see that the corresponding functional forms are different. The third case is much more general. It applies to an agent such as a producer, whose stocks of goods are inter-dependent, either in value or quantity terms. This situation might arise because of the requirements of a production technology with either fixed (Leontiev-type) or variable input coefficients that are linked. Or it might apply to consumers, for whom the combination of stocks (e.g. books and shelf space, or dresses and shoes) is important. For this individual a change in one kind of stock changes the desired levels of other stocks, and hence his/her personal valuation of the combination. There is a convenient restriction on the Z-function that can be applied equally to all...

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