Gravitation of Market Prices towards Normal Prices: Some New Results

Enrico Bellino () and Franklin Serrano ()
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Enrico Bellino: Catholic University of the Sacred Heart
Franklin Serrano: Federal University of Rio de Janeiro

No CSWP25, Centro Sraffa Working Papers from Centro di Ricerche e Documentazione "Piero Sraffa"

Abstract: The gravitation process of market prices towards production prices is here presented by means of an analyti-cal framework where the classical capital mobility principle is coupled with a determination of the deviation of market from normal (natural) prices which closely follows the description provided by Adam Smith: each pe-riod the level of the market price of a commodity will be higher (lower) than its production price if the quanti-ty brought to the market falls short (exceeds) the level of effectual demand. This approach also simplifies the results with respect to those obtained in cross-dual literature. Three versions of the model are here proposed: i) assuming a given level of aggregate employment; ii) assuming a sort of Say’s law; iii) and on the basis of an explicit adjustment of actual outputs to effectual demands. All these cases describe dynamics in which market prices can converge asymptotically towards production prices.

Keywords: Market prices; normal prices; Classical competition; gravitation; effectual demand (search for similar items in EconPapers)
JEL-codes: B12 D20 E11 E30 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2017-10
New Economics Papers: this item is included in nep-cta, nep-hme and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: GRAVITATION OF MARKET PRICES TOWARDS NORMAL PRICES: SOME NEW RESULTS (2018)
Working Paper: Gravitation of market prices towards normal prices: some new results (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:sraffa:0025

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