Capitalism With Capital: A Suggested Remedy to the Absence of Investment Decision-making in Basic Microeconomics Teaching
Abstract“[U]nder competition, the rate of return on investment tends toward equality in all industries.” Introductory and intermediate microeconomics textbooks are sketchy in explaining how capital is allocated by financial markets. Capital budgeting techniques, primarily net present value, deserve a more prominent role. This article suggests ways in which financial economics can be integrated into undergraduate courses to illuminate entry into (and exit from) industries in response to profit opportunities, as an essential part of economists’ narration of resource allocation in a capitalistic, market economy.
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Bibliographic InfoPaper provided by Wesleyan University, Department of Economics in its series Wesleyan Economics Working Papers with number 2006-016.
Length: 25 pages
Date of creation: May 2006
Date of revision:
capital budgeting; present value; competitive equilibrium; economic education;
Find related papers by JEL classification:
- A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Richard J. Gilbert., 1988.
"Mobility Barriers and the Value of Incumbency,"
Economics Working Papers
8895, University of California at Berkeley.
- Richard A. Miller, 2000. "Ten Cheaper Spades: Production Theory and Cost Curves in the Short Run," The Journal of Economic Education, Taylor & Francis Journals, vol. 31(2), pages 119-130, January.
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