Study Guide to Man, Economy, and State with Power and Market

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Chapter 4: Prices and Consumption 47 prices are paid for (virtually) infinitely durable goods, such as land. 8. Welfare Comparisons and the Ultimate Satisfactions of the Consumer All of the praxeological truths of chapter 1 are still applicable in a money economy. Ultimately, what the economist labels a “consumer good” in the market place may in fact truly be a higher-order good for the consumer, because so-called consumer goods (such as cans of Pepsi) are really just means to more ultimate ends (such as satisfying thirst). 9. Some Fallacies Relating to Utility Mainstream economists often derive an equilibrium condition in which the marginal utility of each good, divided by the price of the good, is equal for all goods. The argument is that the marginal penny must yield the same increment in utility, regardless of the good on which it is spent, because if this weren’t the case, then the consumer could achieve a greater amount of total utility by rearranging his or her expenditures. The fallacy here is that utility is not a cardinal concept, and hence it makes no sense to perform arithmetical operations on the “marginal utility” of a given good. APPENDIX A: The Diminishing Marginal Utility of Money Money is a commodity and hence is subject to the law of diminishing marginal utility: the greater the units of money one has, the lower its marginal utility. In the case of money, we must be careful to maintain the ceteris paribus assumptions. For example, prices may change between the time that the 100th and
48 Study Guide to Man, Economy, and State with Power and Market 101st units of money are acquired, and this will affect the individual’s estimate of their respective marginal utilities. APPENDIX B: On Value There are many uses of the word value. In modern Austrian economics, the term usually refers to the subjective value an individual places on a good. However, in the present chapter the capital value of a durable good was its objective exchange value on the market, i.e., how many units of money could be obtained by selling the durable good. Economics is primarily the study of how underlying subjective valuations give rise to objective exchange values in the form of market prices.
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CONTENTS INTRODUCTION . . . . . . .
Page 8 and 9: In June of 2004, I became convinced
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Chapter 8: Production: Entrepreneur
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Chapter Summary Consumer preference
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Chapter 10: Monopoly and Competitio
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Chapter Summary Like all goods, the
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Chapter 11: Money and Its Purchasin
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Chapter Summary Economists often ta
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Chapter 1: Defense Services on the
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Chapter 1: Defense Services on the
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Chapter Outline 1. Types of Interve
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Chapter 2: Fundamentals of Interven
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Chapter Summary Society is composed
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Chapter 4: Binary Intervention: Tax
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Chapter Summary There has been litt
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Apriorism, 1, 9 Ability-to-pay prin
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Index 251 Equilibrium, 47, 104 macr
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Index 253 Medium of exchange, 27, 3
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Index 255 See also Economy, Evenly
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