This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Equality of Demand and Supply Neither Determines Price Nor Clears the Market

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Mohammad Gani (Economic Science Institute, Dhaka, Bangladesh.)

Additional information is available for the following registered author(s):

Abstract

The belief that equality of demand and supply determines price and clears the market is universal. Shockingly, this belief is unfounded. It contradicts macro’s claim that equality of demand and supply determines output. It contradicts (new) monetary theory, which claims that equality of demand and supply is necessary but not sufficient to clear the market. In indirect trade, money also must be used. Micro says that price is equal to marginal cost, rejecting trade theory’s claim that trade is gainful. To remove these and other contradictions, price theory must be repaired. Money’s role in market clearing must also be acknowledged. A new paradigm brings all of economics in a unified model of exchange. It abolishes the micro-macro division, and assimilates price theory with trade and monetary theory. It studies equality of demand and supply at four levels: for each good, transaction, agent, and economy. This equality determines output but not price. Arbitrage determines price. Producers and consumers as price-taker choose quantities, while arbitrageurs choose prices to clear the market. The equilibrium market price exceeds marginal cost to permit gainful trade. Intermediation breaks the link between cost and price and benefit. This new theory goes far beyond neoclassical economics.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://129.3.20.41/eps/mic/papers/0405/0405007.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by EconWPA in its series Microeconomics with number 0405007.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 22 pages
Date of creation: 24 May 2004
Date of revision:
Handle: RePEc:wpa:wuwpmi:0405007

Note: Type of Document - pdf; pages: 22. The most serious and shocking challenge to price theory will wake you up in horror.
Contact details of provider:
Web page: http://129.3.20.41

For technical questions regarding this item, or to correct its listing, contact: (EconWPA).

Related research
Keywords: Market Clearing; Price; Allocation; Exchange; Entrepreneurship; Money; Unemployment Arrow; Jevons; Keynes; Kirzner; Marshall; Menger; Mises; Walras.;

Find related papers by JEL classification:
A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (includes Austrian, Marshallian, Walrasian)
B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
C67 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Input-Output Models
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
D46 - Microeconomics - - Market Structure and Pricing - - - Value Theory
D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
J60 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - General

This paper has been announced in the following NEP Reports:

Statistics
Access and download statistics

Did you know? IDEAS also computes impact factors for journals and working paper series.

This page was last updated on 2009-11-25.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.