Answered: Why short-run adjustment of output to…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Why short-run adjustment of output to demand may not take place as envisaged in marginalist theory?

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Marginalist theory

A concept of economics known as marginalist makes utilization of a product's secondary, or marginal, usefulness to attempt to demonstrate why the value of commodities and services varies.
It claims that perhaps the price difference between water and diamond, for instance, can be attributed to the jewels' higher added contentment.
As nothing more than a result, the diamond has a higher marginal utility whereas the water has a stronger overall utility.
But even though the conception of marginal utility serves as the cornerstone of theory, marginalists, following Alfred Marshall's example, depended on the concept of marginal physical productivity to explain the cost.
The British marginalists who founded the neoclassical school did away with the idea of utility as well as given marginal rates for substitution a somewhat more important place in the analysis.

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