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THE ANIMAL SPIRITS February 28, 2016

Posted by OromianEconomist in Economics, Uncategorized.
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Odaa Oromoo

INTRODUCTION

 

The resources are scarce in comparison to our never ending wants andEconomics is concerned with the ‘rational’ management of these resources that have alternate uses to maximise the gains at both micro-macro level.

There are several economic models that have been developed that have distinct characteristics and unique features. Adam Smith’s Capitalist model, the one where the market forces of demand and supply move freely to determine the Equilibrium level represents an ideal system of want origin and its satisfaction in the perfect sense. Any extension of demand will shift the Equilibrium price upwards and this in turn, will motivate the ‘rational’ producers to supply more to the market at the increased price to maximise their profits. This will eventually stabilise the price and eventually Equilibrium will be restored in the market. How simple is that! This model seems stable and logical in every sense, doesn’t it?

Source: THE ANIMAL SPIRITS

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