Wednesday, July 13, 2011

Economic Dynamics homework help

Now we turn to the method of economic dynamics which has become very popular in contemporary economics. Economic dynamics is a more realistic method of analyzing the behaviour of the economy or certain economic variables through time. The definition of economic dynamics has been a controversial question and it has been interpreted in various different ways. We shall try to explain the standard definitions of economic dynamics.

Frisch’s time period analysis

The course thorough time of a system economic variable can be explained in two ways. One is the method of economic statics described above in which the relations between the relevant variables in a given system refer to the same point or period of time. On the other hand, if the analysis candies the relationship between relevant variables whose values belong to different points of time is known as dynamic analysis or economic dynamics. The relations between certain variables the values of which refer to the different points or different periods of time are known as dynamic relationships. Thus, Professor Schumpeter says, we call a relation dynamic if it connects economic quantities that refer to defend points of time. Thus if he quantity of a commodity that is offeree at a point of time (i) is considered as dependent upon the price that prevailed at the point of time (t – 1) this is a dynamic relit on in a word economic dynamics is the analysis of dynamic relationships.

We thus see that in economic dynamics we duly recognizes the element of time in the adjustment of the given variables to each to her and accordingly analyse the relationships between given variables relating to different points of time professor ranger Frisch who is one of the pioneers in the use of the technique of dynamic analysis in economics defines economic dynamics as follows a system is dynamical if its dehaviour over item is determined by functional equation in which variables at different points of time are involved in an essential way in dynamic analysis, he further elaborates we comfier not only a set of magnitudes in a given point of time and study the interrelations between them but we consider the magnitudes of certain variables in different points of time and we introduce certain equations which embrace at the same time several fo those magnitudes belonging to different instants. This is the essential characteristic of a dynamic theory only by a theory of this type we can explain how one situation grows out of the foregoing.

Many examples of dynamic relationships from both micro and macroeconomic fields can be given if one assumes that the supply (S) for goods in the market in the given time (t) depends upon the price that prevails in the preceding period (that is t – 1) the relationship between supply and price is said to be dynamic. This dynamic functional relation can be written as:

St = ƒ (P t – 1)

Where Si stands for the supply of a good offered in a given period t and P t-1 for the price in the preceding period. Likewise if we grant that the quantity demanded (D) of a good in a period t is a function of the expected price in the succeeding period (t + 1), the relation between demand and price will be said to be dynamic and the analysis fo such relation would be called dynamic theory or economic dynamics.

Similarly examples of dynamic relationship can be given from the macro filed. If it is assumed that the consumption of the economy in a given period depends upon the income in the preceding period (t -1) we shall be conceiving a dynamic relation. This can be written as:

Ct = ƒ (Y t-1)

When macroeconomic theory (theory of income employment and growth) is treated dynamically, that is when macroeconomic dynamic relationships are analysed the theory is known as it is essential to understand that in modem theory statics and dynamics refer to a particular mode of treatment or type of analysis of the phenomena observed while the adjective stationary and changing describe the actual economic phenomena. A static or dynamic theory is a particular kind of explanation on of economic phenomena and indeed stationary and changing phenomena can be submitted either to a static or to a dynamic analysis.

Saturday, July 2, 2011

Rent Concepts homework help

The term rent is used not only in the sense of reward for the use of land but also in the sense of surplus earnings of the factors over their transfer earnings. In fact in the alter sense the concept of rent has been generalized so that it applies to surplus return over and above the transfer earnings of all factors of production. So that it is no longer peculiarly associated with land we shall first discuss the determination of land rent and will them explain the concept of rent as surplus return over transfer earnings of the factor.

A distinguishing feature of land is that no human effort or sacrifice has been necessary to make it available to the society. Land to society is a free gift of nature. Society has not incurred any cost to obtain the land further since land is not producible by man its supply is absolutely inelastic although its productivity can be increased by various improvements are made by the efforts of man and therefore constituter capital goods. As the quantity of land available for use is scarce relative to demand a price must be paid for its use. This price for the use of land or what is commonly called land rent is obtained by those people in the society in whom the ownership of land is vested. Since these private owners of land have not incurred any relics to bring land into existence the rent which they obtain is a surplus payment to them. the whoa of the earnings of land rent (excluding of course the return on capital investment in the form of improvements made on land by the owners) are surplus since land is there in any case and does not require any costs or human efforts to be made to bring it not existence. Thus the term rent which was originally employed for  the price paid for the use of land came to be used fo rate surplus earnings of any factor of production price paid for the use fo land came to be used for the surplus earnings of any factor of production in excess of the cost incurred to obtain its service. Since the land in it’s entirely to the whole society being free gift of nature does not require any cost to be paid in order to make it available to the society for use in production the whole earnings of land are regarded ad surplus. Thus the whole earnings oaf lands form the view point of the society become economies rent. We shall discuss this concept of economics rent is greater detail when we take up the explanation fo the concept of rent as a surplus over transfer earrings to all factor of production.

It should be noted that rent as a payment to the landlord for hiring or use of land by the tenant and the concept of economic rent as surplus over transfer earnings which applies to all factors of producing are altogether different concepts and therefore should not be confused with each other. Modern economists generally call payment of hiring of land as land rent and surplus over transfer earnings of the factors as economic rent.

It is worthwhile to mote here that marshal extended the concept of rent to cover the earnings net of depreciation to and interest charges) of fixed capital equipment like machinery in the short run. The distinguishing characteristic of land is that fact that its supply is perfectly inelastic and therefore its earnings depend mainly upon the demand for it. But in the short run period fixed capital equipment like machinery is likewise perfectly inelastic in supply and cost of production is not relevant once it has been installed for production. Thus in the short period the earnings of fixed capital equipment depend mainly upon the demand conditions and are thus similar to land rent and have therefore been called rent by marshal since these capital equipments are to permanently in fixed call their earnings in the short period as Queasy Rent rather than rent.