Quick clarifications and corrections on my last reply to Fred (which, again, didn't make it to the list archives):
> Supply: K=f(r) > Demand: K=g(MP_K) > Equilibrium: f(r) = g(MP_K) > > Again, K=f(r) says that K is positively related to r (or not so > negatively related as g). K=g(MP_K) says that K is negatively related > to r (or not so positively related as f). If r is the opportunity cost, why do I say that the K supply function f is increasing in K. Doesn't cost make people supply less of something? Again, this way of presenting things is by analogy to the simple textbook market model people are used to; although people on PEN-L probably despise it. Like in every market, there are two sides here, buyer and seller, or in this case, the investor and the entrepreneur. What is a cost for the entrepreneur is a benefit for the investor. If investor and entrepreneur are the same person, then the cost is imputed. Readers may also think by analogy to the usual textbook way of presenting the labor market. The demand curve is the MP_L curve, decreasing in L, and the supply curve is the wage rate (a cost for the entrepreneur but an incentive for the worker), increasing in L. > Fred, you're switching the context again! With due respect, if you're > doing it on purpose, it is not funny. If you are confused, then you > need to go back and review this stuff a bit more carefully. Here I managed to sound paranoid and patronizing at once. Sorry about this, Fred. I'm taking it back with apologies. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
