tag:blogger.com,1999:blog-6245381193993153721.post8662483001880034514..comments2024-03-17T00:23:24.896-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: Keynesians, Austrians, Demand, and ProductionLord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-6245381193993153721.post-26395268744640992982014-01-29T09:09:07.338-08:002014-01-29T09:09:07.338-08:00(1) flexprice sectors (such as commodities and oth...(1) flexprice sectors (such as commodities and other factors) might well experience inflation during booms<br /><br />(2) some of this factor input inflation enters the mark-up pricing sector when total average unit costs rise to an extent that a firm will want to raise prices (and assuming its competitors, if any, also do so). <br /><br />But that process is neither automatic nor necessary. It will be uneven, since many firms will have falling total average costs given fixed overheads and rising production quantities. That fall in unit overhead cots might cover rising direct/variable cost increases so that no price change takes place. <br /><br />Or the firm may be frightened that its competitors will not raise prices, and so they will not raise theirs.<br /><br />(3) it is likely that wage rises during booms might drive inflation too<br />Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-20732006109089708122014-01-28T19:12:53.070-08:002014-01-28T19:12:53.070-08:00"Although booms do indeed tend to be inflatio..."Although booms do indeed tend to be inflationary in modern economies, nevertheless the process of inflation in a mark-up pricing world is uneven, much less intense and quite different from any crude economic theory that holds that all or most prices are flexible and simply a function of supply and demand dynamics."<br /><br />How does a cost+markup theory explain inflation in a boom ? Econ 101s says that increased demand for inputs pushes up prices (supply stays the same but demand increases) - but cost+markup theory rejects this as an explanation. So why are booms inflationary? Perhaps supply and demand only holds in an inflationary boom and not at other times.<br /><br />Rob Rawlingsnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-78093889479104960432014-01-28T10:17:04.014-08:002014-01-28T10:17:04.014-08:00And I'm saying you're thinking micro rathe...And I'm saying you're thinking micro rather than macro. In the macro, you need to consider the supply curves for various factors of production. Pure qty theories only apply if you think the supply curves are flat (increased qty transacted, same price).<br /><br />You are correct that any unsaturated "fixed cost" can expand this way for a while, because it is unsaturated. Once it is saturated, it too will be affected by it's supply curve since you will need to buy more of them.marrishttps://www.blogger.com/profile/07508519250212893577noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-71709014954479306192014-01-28T05:53:54.363-08:002014-01-28T05:53:54.363-08:00Aggregated demand depends on the level of availabl...Aggregated demand depends on the level of available income not prices.<br /><br />if the demand of a good goes down, other good must see its demand raise. The same goes with prices, if price of a product goes down, either you buy more of that product and less of others, or you will demand less (in value) of that good and buy other goods with the money saved.<br /><br />Aggregated demand doesn't behave like a demand curve for a product, actually we can question the existence of a aggregated demand curve, because all the determinantes that make you travel in the curve (price changes, and quantaty demanded) in the end make both aggregated demand and supply shift,rastanplanhttps://www.blogger.com/profile/13069268139980949915noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-88143211937386860832014-01-28T02:33:19.528-08:002014-01-28T02:33:19.528-08:00When quantity produced expands, then with fixed/ov...When quantity produced expands, then with fixed/overhead costs forming a significant part of costs, this means total average unit costs fall as demand rises and (as I said) quantity produced expands to meet that demand. <br /><br />Most firms have L shaped demand curves, not V-shaped ones, and marginal cost is mostly irrelevant:<br /><br />http://socialdemocracy21stcentury.blogspot.com/2013/11/price-average-total-cost-average.html<br /><br />Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-27254624268073782462014-01-27T14:13:42.366-08:002014-01-27T14:13:42.366-08:00This post seems very imbalanced. I could just as e...This post seems very imbalanced. I could just as easily write that pure quantity signaling only works in special cases.<br /><br />It's nice that the survey recipients think they will increase inputs in response to demand changes. But they are thinking micro. If the input supply curves are not flat, the price of the input will be bid up and marginal cost will increase.marrishttps://www.blogger.com/profile/07508519250212893577noreply@blogger.com