Economics theorists Micro Flashcards
Says law
This is the law that states that supply creates its own demand
Adam smith invisible hand
Adam smith states that supply and demand is determined by market forces which is known as the invisible hand
Karl Marx capitalism
Karl marx was against capitalism in free markets because he said they exploited labour and so provision by the government will prevent capitalism
Freidrick Hayek
He stated that the market should be a free market but the government should act as a safety net to prevent externalities and provision of demerit goods etc
Joan Robinson
she came out with the idea that all competitive markets have some degree of monopoly power - she started the monopolistic competition revolution along with edward chamblin
Creative destruction
This is the idea that when an innovative, efficient production or industry evolves, this leads to growth in the new sector etc but death to the old way - could structurally unemploy staff etc
Rational decision making
People make decisions to maximise their own utility
Pareto Efficiency
This states that in a perfectly competitive market, this means that they are maximising efficiency to the point that nothing can be changed without making someone else worse off
What is the theory for profit maximisation?
The neoclassical theory which is a behavioural assumption which allows is said to be the best for firms when making rational decisions on the provision of goods in a market
What is the theory for revenue maximisation and the principle agent problem?
William Balmoul said that managers are most interested in their level of revenue since this is what their salary depends on
- Also said to increase the prestige of the business
What is the theorist for sales maximisation?
Robin Marris which states managers aim to maximise the growth of their company above any other objective.
Increased market share - increased growth
What is oliver williamsons theory?
Managers make decisions based upon their own satisfaction
