EconPapers    
Economics at your fingertips  
 

Market Behaviour of Consumers and Producers

Parthasarathi Shome
Additional contact information
Parthasarathi Shome: London School of Economics

Chapter 7 in Taxation History, Theory, Law and Administration, 2021, pp 63-74 from Springer

Abstract: Abstract In a world without taxes, how consumers and producers are assumed to behave in a perfectly competitive economy is addressed in this chapter. Consumers express their demands for products in the marketplace reflected in their ‘utility functions’. Producers use engineering technology and associated costs to construct factories and warehouses that comprise their fixed cost for their production structure. They also use machinery, raw materials and labour and obtain their input prices from the market. They combine fixed cost with the variable costs, the former remaining constant and the latter varying with the quantity they choose to produce. In turn, that determines their supply in the market revealing how much they will supply at each price faced by their product. Thus, all consumers combine to generate varying market demands at different market prices and all suppliers combine to generate changing market supplies at different market prices. An equilibrium price–quantity combination occurs where the schedules or curves of market demand and supply of a commodity intersect. At the equilibrium, the ‘marginal rates of substitution’ among consumers equal the ‘marginal rates of transformation’ among producers. These foundational concepts of market equilibrium are elaborated through figures and explanations in this chapter.

Date: 2021
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-030-68214-9_7

Ordering information: This item can be ordered from
http://www.springer.com/9783030682149

DOI: 10.1007/978-3-030-68214-9_7

Access Statistics for this chapter

More chapters in Springer Texts in Business and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2025-05-18
Handle: RePEc:spr:sptchp:978-3-030-68214-9_7