thesis on law of demand

The well-known "law of supply and demand" says that an increase in the price of a commodity leads to a decrease in the aggregate demand for this commodity and an increase in aggregate supply. There is, however, no theoretical foundation for this "law". Empirical evidence, on the other hand, should be interpreted with care. If one estimates the parameters of certain functional forms for demand and supply functions, then the results may simply be consequences of the parametric assumptions made in estimation. The first chapter of the thesis discusses the implications of the assumption of profit and utility maximisation for the properties of demand and supply functions. It explains why economic rationality on the microlevel does not, in general, lead to macroeconomic regularities and suggests replacing the consumption sector of the neoclassical equilibrium model by a large population of individually small consumers. Such a population will be explored in the second chapter. The chapter is a direct outgrowth of a basic contribution by W. Hildenbrand: "On the Law of Demand", Econometrica 1983. In W. Hildenbrand's model the market demand function is defined by integrating an individual demand function with respect to an exogenously given income distribution. We build into the model an individual labour supply function and then compare the matrix of aggregate income effects studied by W. Hildenbrand with that obtained by integrating the individual demand function with respect to a distribution of wage rates. The empirical part of the thesis analyses the labour supply and earnings data in the U.K. Family Expenditure Survey 1970-85. Using non- parametric smoothing methods, the elasticity of labour supply with respect to the wage rate is estimated for several groups of workers. The estimations for full-time workers confirm the famous "downward sloping" labour supply function. The estimated elasticities for the entire population of workers for the years 1970-85 have the mean value 0.2 and the standard deviation 0.02.

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What Is the Law of Demand?

The Balance / Julie Bang

The law of demand states that all other things being equal, the quantity bought of a good or service is a function of price.

Key Takeaways

• The law of demand affirms the inverse relationship between price and demand. People will buy less of something when its price rises; they'll buy more when its price falls
• The law of demand assumes that all determinants of demand, except price, remain unchanged.
• Demand can be visually represented by a demand curve within a graph called the demand schedule.
• Aside from price, factors that affect demand are consumer income, preferences, expectations, and prices of related commodities. The number of buyers can also affect demand.
• The law of demand can be seen in U.S. monetary policy.

Definition and Examples of the Law of Demand

According to the law of demand, the quantity bought of a good or service is a function of price—with all other things being equal. As long as nothing else changes, people will buy less of something when its price rises. They'll buy more when its price falls.

This relationship holds true as long as "all other things remain equal." That part is so important that economists use a Latin term to describe it: ceteris paribus .

The law of demand can help us understand why things are priced the way they are. For example, retailers use the law of demand every time they offer a sale. In the short term, all other things are equal. Sales are very successful in driving demand. Shoppers respond immediately to the advertised price drop. It works especially well during massive holiday sales, such as Black Friday and Cyber Monday.

How the Law of Demand Works

There are two main ways to visualize the law of demand: the demand schedule and the demand curve.

The demand schedule tells you the exact quantity that will be purchased at any given price. The demand curve plots those numbers on a chart. The quantity is on the horizontal or x-axis , and the price is on the vertical or y-axis .

If the amount bought changes a lot when the price does, then it's called elastic demand . An example of this could be something like buying ice cream. If the price rises too high for your preference, you could easily purchase a different dessert instead.

If the quantity doesn't change much when the price does, that's called inelastic demand . An example of this is gasoline. You need to buy enough to get to work, regardless of the price.

The factors that determine the level of demand are called "determinants." These are also part of the "all other things" that need to be equal under ceteris paribus . The determinants of demand are the prices of related goods or services, income, tastes or preferences, and expectations.

For aggregate demand, the number of buyers in the market is also a determinant. 

If the other determinants change, then consumers will buy more or less of the product even though the price remains the same. That's called a shift in the demand curve.

The Law of Demand and the Business Cycle

Politicians and central bankers understand the law of demand very well. The Federal Reserve operates with a dual mandate to prevent inflation while reducing unemployment.

During the expansion phase of the business cycle, the Fed tries to reduce demand for all goods and services by raising the price of everything. It does this with contractionary monetary policy. It raised the fed funds rate, which increases interest rates on loans and mortgages.

That has the same effect as raising prices—first on loans, then on everything bought with loans, and finally everything else.

Of course, when prices go up, so does inflation. But that's not always a bad thing. The Fed has a 2% inflation target for the core inflation rate. The nation's central bank wants that level of mild inflation. It sets an expectation that prices will increase by 2% a year. Demand increases because people know that things will only cost more next year. They may as well buy it now, ceteris paribus .

During a recession or the contraction phase of the business cycle, policymakers have a worse problem. They've got to stimulate demand when workers are losing jobs and homes and have less income and wealth. Expansionary monetary policy lowers interest rates, thereby reducing the price of everything. If the recession is bad enough, it doesn't reduce the price enough to offset the lower income. 

In that case, expansionary fiscal policy is needed. During periods of high unemployment, the government may extend unemployment benefits and cut taxes. As a result, the deficit increases because the government's tax revenue falls. Once confidence and demand are restored, the deficit should shrink as tax receipts increase.

The Library of Economics and Liberty. " Demand ." Accessed June 24, 2021.

Saylor Academy. " ECON101: Principles of Microeconomics ." Accessed June 24, 2021.

Corporate Finance Institute. " What Is a Demand Curve? " Accessed June 24, 2021.

Lumen Learning. " Reading: Examples of Elastic and Inelastic Demand ." Accessed June 24, 2021.

California State University (Northridge). " Understand How Various Factors Shift Supply or Demand and Understand the Consequences for Equilibrium Price and Quantity ," Pages 1-2. Accessed June 24, 2021.

University of Wisconsin-Madison. " Supply and Demand ." Accessed June 24, 2021.

Federal Reserve Bank of St. Louis. " Stable Prices, Stable Economy: Keeping Inflation in Check Must Be No. 1 Goal of Monetary Policymakers ." Accessed June 24, 2021.

Federal Reserve Bank of St. Louis. " Making Sense of the Federal Reserve ." Accessed June 24, 2021.

Federal Reserve Bank of St. Louis. " The Fed’s Inflation Target: Why 2 Percent? " Accessed June 24, 2021.

Federal Reserve Bank of St. Louis. " A Closer Look at Open Market Operations ." Accessed June 24, 2021.

Federal Reserve. " What Is the Difference Between Monetary Policy and Fiscal Policy, and How Are They Related? ” Accessed June 24, 2021.

Washington State Employment Security Department. " Benefits Extensions ." Accessed June 24, 2021.

Law of Demand

This law of demand expresses the functional relationship between price and quantity demanded.

The law of demand or functional relationship between price and quantity demanded of a commodity is one of the best known and most important laws of economic theory. According to the law of demand, other things being equal, if the price of a commodity falls, the quantity demand of it will rise, and if the price of the commodity rises, its quantity demanded will decline.

Thus, according to the law of demand, there is inverse relationship between price and quantity demanded, other things remaining the same. These other things which are assumed to be constant are the tastes and preferences of the consumer, the income of the consumer, and the prices of related goods. If these other factors which determine demand also undergo a change at the same time, then the inverse price-demand relationship may not hold good Thus, the constancy of these other things which is generally stated as ceteris paribus is an important qualification of the law of demand.

Demand Curve and the Law of Demand:

The law of demand can be illustrated through a demand schedule and a demand curve. A demand schedule of an individual consumer is presented in Table 6.1. It will be seen from this demand schedule that when the price of a commodity is Rs. 12 per unit, the consumer purchases 10 units of the commodity. When the price of the commodity falls to Rs. 10, he purchases 20 units of the commodity.

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Similarly, when the price further falls, quantity demanded by him goes on rising until at price Rs.2, the quantity demanded by him rises to 60 units. We can convert this demand schedule into a demand curve by graphically plotting the various price-quantity combinations, and this has been done in Fig. 6.1 where along the X-axis, quantity demanded is measured and along the Y-axis price of the commodity is measured.

By plotting 10 units of the commodity against price 12, we get a point in Fig. 6. 1 Likewise, by plotting 20 units of the commodity demanded against price 10 we get another point in Fig. 6.1. Similarly, other points are plotted representing other combinations of price and quantity demanded of the commodity and are shown in Fig. 6.1. By joining these various points, we get a curve DD, which is known as the demand curve. Thus, this demand curve is a graphic representation of quantities of a good which are demanded by the consumer at various possible prices in a given period of time.

It should be noted that a demand schedule or a demand curve does not tell us what the price is; it only tells us how much quantity of the good would be pur­chased by the consumer at a various possible prices. Further, it will be seen from both the demand schedule and the demand curve that as the price of a commodity falls, more quantity of it is purchased or demanded.

Since more is demanded at a lower price and less is demanded at a higher price, the demand curve slopes downward to the right. Thus, the downward-sloping demand curve is in accordance with the law of demand which, as stated above, describes inverse price-demand relationship.

It is important to note here that behind this demand curve or price-demand relationship always lie the tastes and preferences of the consumer, his income, the prices of substitutes and complementary goods, all of which are assumed to be constant in drawing a demand curve.

If any change occurs in any of these other factors, the whole demand schedule or demand curve will change and new demand schedule or a demand curve will have to be drawn. Further, in drawing a demand curve, we assume that the buyer or consumer does not exercise any influence over the price of a commodity, that is, he takes the price of the commodity as given and constant for him.

Reasons for the Law of Demand: Why does Demand Curve Slope Downward?

We have explained above that, when price falls the quantity demanded of a commodity rises and vice versa, other things remaining the same. It is due to this law of demand that demand curve slopes downward to the right. Now, the important question is why the demand curve slopes downward, or in other words, why the law of demand which describes inverse price-demand relationship is valid.

It may however be mentioned here that there are two factors due to which quantity demanded increases when price falls:

(1) Income effect,

(2) Substitution effect.

(1) Income Effect:

When the price of a commodity falls the consumer can buy more quantity of the commodity with his given income. Or, if he chooses to buy the same amount of quantity as before, some money will be left with him because he has to spend less on the commodity due to its lower price.

In other words, as a result of fall in the price of a commodity, consumer’s real income or purchasing power increases. This increase in real income induces the consumer to buy more of that commodity. This is called income effect of the change in price of the commodity. This is one reason why a consumer buys more of a commodity when its price falls.

(2) Substitution Effect:

The other important reason why the quantity demanded of a commodity rises as its price falls is the substitution effect. When price of a commodity falls, it becomes relatively cheaper than other commodities. This induces the consumer to substitute the commodity whose price has fallen for other commodities which have now become relatively dearer. As a result of this substitution effect, the quantity demanded of the commodity, whose price has fallen, rises.

This substitution effect is more important than the income effect. Marshall explained the downward-sloping demand curve with the aid of this substitution effect alone, since he ignored the income effect of the price change. But in some cases even the income effect of the price change is very significant and cannot be ignored. Hicks and Allen who put forward an alternative theory of demand called as indifference curve analysis of consumer’s behaviour explain this downward-sloping demand curve with the help of both income and substitution effects.

Exceptions to the Law of Demand:

Law of demand is generally believed to be valid in most of the situations. However, some exceptions to the law of demand have been pointed out.

Goods having Prestige Value: Veblen Effect:

One exception to the law of demand is associated with the name of the economist, Thorstein Veblen who propounded the doctrine of conspicuous consumption. According to Veblen, some consumers measure the utility of a commodity entirely by its price i.e., for them, the greater the price of a commodity, the greater its utility.

For example, diamonds are considered as prestige good in the society and for the upper strata of the society the higher the price of diamonds, the higher the prestige value of them and therefore the greater utility or desirability of them. In this case, some consumers will buy less of the diamonds at a lower price because with the fall in price its prestige value goes down.

On the other hand, when price of diamonds goes up, their prestige value goes up and therefore their utility or desirability increases. As a result at a higher price the quantity demanded of diamonds by a consumer will rise. This is called Veblen effect. Besides diamonds, other goods such as mink coats, luxury cars have prestige value and Veblen effect works in their case too.

Giffen Goods:

Another exception to the law of demand was pointed out by Sir Robert Giffen who observed that when price of bread increased, the low-paid British workers in the early 19th century purchased more bread and not less of it and this is contrary to the law of demand described above. The reason given for this is that these British workers consumed a diet of mainly bread and when the price of bread went up they were compelled to spend more on given quantity of bread.

Therefore, they could not afford to purchase as much meat as before. Thus, they substituted even bread for meat in order to maintain their intake of food. After the name of Robert Giffen, such goods in whose case there is a direct price-demand relationship are called Giffen goods. It is important to note that with the rise in the price of a Giffen good, its quantity demand increases and with the fall in its price its quantity demanded decreases, the demand curve will slope upward to the right and not downward.

Related Articles:

• How do Income and Substitution Effects help to Explain Law of Demand?
• Downward Sloping Demand Curve: 7 Reasons
• Price-Demand Relationship of a Good | Indifference Curve | Economics
• Difference between Substitution Effect and Income Effect

The Law of Demand Expository Essay

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Introduction

There are two types of social equilibrium that is dynamic and static equilibriums, abnormal and normal equilibriums the first is active, the second is passive.the first is unstable and the second is stable Equilibrium is the spot where consumers and producers exchange services and goods at a quantity and cost that signify a balance among the consumer’s desire to forfeit less cash and the producer’s desire to get more cash.

It is the point at which everybody prepared to pay the price of the market gets their demand satisfied, while anybody prepared to manufacture at the price of the market gets a buyer for the service or good. [Roger 2001]

A market can be defined as an area where services and goods are exchanged. One can imagine a bustling lane complete of sellers and buyers or a stock trade full of citizens selling and buying stocks. These are touchable manifestations of a market.

Economics can be defined as a communal discipline which checks the distribution, consumption and production of services and goods. Microeconomics can be defined as a tool that examines the performance of fundamental elements in the financial system including personalized agents or markets, that is, firms and consumers, sellers and buyers. [William and Alain 2006]

Macroeconomics can be defined as a tool that addresses problems affecting the whole economy. That is, inflation, economic growth, unemployment and fiscal and monetary policy. Demand is a connection amidst two variables quantity and price demanded, with all other additional factors that may influence demand held steady. [Esther1998]

How the Sonnenschein-Mantel-Debreu Theorem in General Equilibrium affect the law of demand and the law of demand

The demand law In money matters can be defined as a microeconomic commandment which states; ‘As the price of a service or good increases, consumer demand for the service or good will decrease and as the price of a service or good decreases, consumer demand for service or good will increase. When all the other factors remain unchanged. [Irvin 2011]

Below is a graph illustrating the law of demand?

Source: (Rick Kash 2002)

From the graph it can be seen clearly that when the price increase from P3 to P2 the demand falls from Q2 to Q3 consequently when the price decreases from P1 to P2, the demand increases from Q2 TO Q1. According to Investopedia, law of demand shows the consequences that price variations have on consumer actions.

For example, a consumer will purchase more burgers if the price of the burgers falls. Relatively a consumer will purchase less burgers if the burgers price goes up or increases.

That is the greater the amount sold, the smaller the price should be in order for it to get purchasers or buyers. For instance, if the price of milk goes up automatically the demand of milk goes down [Rick Kash 2002] .The Sonnenschein–Mantel–Debreu Theorem is named after four economists who are Gerard Debreu, Rolf Ricardo Mantel, and Hugo Freund Sonnenschein.

As a result of general economics. It states; ‘The surplus demand function for an economy is not limited by the usual reasonableness restrictions on individual demands in the economy’.For example, if in a country’s economy the price of a commodity like petroleum goes high the demand for this particular commodity is not affected by restrictions of the individual demand this is because the customers will still use the commodity. [Lain and Henry 1998]

On the other side if the price of petroleum goes down the demand for the same commodity is not affected by restrictions of the individual demand for the same commodity because the amount regularly consumed remains. Thus microeconomics reasonableness assumptions do not have the same macroeconomics results. The implications of the theorem are mostly manifested in the interdependent markets. The economic equilibrium cannot be exceptional or stable.

According to the theorem, the Walrasian aggregate excess demand function inherits only certain properties of individual excess functions. Policy-makers did not favor forms of monetarism and supply-side economics, the New Classical economics is the dominant neoclassical theory.

The theory says that the existing expectations in the financial system are correspondent to what the prospect state of the financial system will be. This contradicts the thought that administration policy influences the decisions of public in the financial system [David 2006]

According to Investopedia the thought is that rational expectations of the company in a financial system will incompletely have an effect on what happens to the financial system in the prospect. Because he believes that the price will rise in the future.

According to Sonnenschein Mantel Debreu Theorem (Sonnenschein 1973, Mantel 1974, Debreu 1974) they show that under assumptions under which general equilibrium theory has been developed, there are no limitations on the behavior of data aggregates either within a cross section or intertemporally. General equilibrium theory is an overarching organizing framework for economics.

Without any limitations on the distribution of individual qualities, the Sonnenschein-Mantel-Debreu Theorem implies that general equilibrium theory imposes only extremely limited restrictions on combined data. Interactions methods bring the possibility that common types of combined behavior come out from widely changeable collections of individual’s qualities.

Many comprehensive phenomena, externalities or other types of market short comings naturally exist which do not lie under the purview of general equilibrium theory [Bryant 2010].

General Equilibrium theory plays several roles in monetarism theory, According to the monetarist the money supply function is where the money stock comes from given the money stock, the demand for money, would settle on the speed of distribution. [James 1969].

The monetarists take the money stock to be an exogenous variable resolute independently in the money supply function; the rise in the monetary content influence the increase in money stock, that is, bank treasury and money in vigorous movement or in the money multiplier while in the theory by Keysian money is taken to be an induced unpredictable or a lively or sovereign variable. [Roger 1999]

Therefore, according to this the returns increases, there would be a rise in demand for money thus the money seems to be formed from the variation of income. The monetary influence has full power on money supply through the stored requirement, interest pace and credit policy.

A chain reaction would result from a change in the money of substitutions causing rates, interests, prices, employment, and production to change; income change results from monetary change. [Keizo Nagatani 1981].

One implied suggestion of monetarism is “lender of last resort” which is a Federal Reserve function, that is, a savior of institutions and as a stabilizer of monetary markets through the refinancing of money market entities and banks as a provider of reserves.

Monetarism drawn in, first a theory cycle, and then as a result of these a suggestion for the behavior of financial policy. Specifically, price increases was alleged to be reasonable according to the rate of increase of the cycle, and the money supply, or more accurately it is revolving points according to the changes [Laidler 2004, pg 395].

In this increase rate as an conceptual mode the demand for money was a difficulty reasonably agreeable realistic to price theory , as an practical subject it seemed to be a stable function finely described by a small number of parameters [Friedman 1959].

Laidler different from Friedman who described money as a long lasting consumer he looked at it as a ‘buffer stock’ also different from the approach adopted by Friedman and Keynesian, the Walrasian equilibrium, he also embraced disequilibrium.

Manchester monetarism, Laidler, had in reality never assumed the Keynesian is-lm model that he had used to express it nor market clearing. The ordinary rate of joblessness is the point that would be positioned out by the systems of general equilibrium equations by Walrasian. According to Laidler “What markets do in our theories, money does it in the world [Sylee 1990].

General Equilibrium Theory views the properties and process of liberated market economies. The ground is a response to a sequence of questions at first written by an economist by the name Leon Walras regarding the process of markets. Frank Hahn stated it in the subsequent way: ‘Does consistency come from the search of personal importance through a structure of interrelated deregulated markets, without chaos, and how is it attained? [Friedman 1968, Pg 8]

Role played by General Equilibrium Theory in Monetarism and Rational Expectations Theories and the light shed on Rational Expectations by the said Theorem

The role played by general equilibrium theory plays several roles in the rational expectations theory, a predominantly low value for shares in a corporation may indicate to an ignorant agent that better knowledgeable agents are not selling the stock or buying the stock.

The view of rational expectation equilibrium is commonly acknowledged extension of the general equilibrium to economies with unevenly knowledgeable agents.

In rational expectations, representation agents maximize expected utility with respect to an updated probability distribution that combines their initial information with the additional information conveyed by the prices, but not with respect to an exogenously given probability distribution [Laidler and David 1984].

General equilibrium theory’s outlook is that wages and prices are either very sluggish in responding to change or rigid in overall demand and hence fail to complete their customary market payment functions.

In the Keynesian analysis, in production and employment increases or decreases in overall demand in the short run such as occur in a business cycle expansion or contraction are reflected mainly in changes in the real economy, while proponents of the rational expectations equilibrium theory retain that, balance by adjustments in prices and wages is given by supply and demand even at the level of the overall economy are constantly. [Peter 2009]

Employees and businessmen even if rational regarding the markets where they themselves operate are uninformed about all additional markets and accordingly prone to make mistakes on how much labor to supply or produce in response to a variation in demand.making these mistakes and then making a correction give growth to cyclical engagements. [Roger 1999]

Reduced forms of models are required by the general equilibrium theory when the analysis of equilibria are being done ,without or with rational expectation requirement for the absolute requirement of markets, agents , e.t.c, that is, as it is required by general equilibrium theory.[Bryant 2010]

According to the general equilibrium theory when markets are complete, and when agents are risk averse then they are tough on changes in fragile modeling options concerning the prior choice of the uncertainty to be included in to model.

The objection of insurance then depends on the authoritative outcome of completeness insisted by the in effective theorem. Full insurance restores the efficiency of the market equilibria dynamic, possibly generated by arbitrary beliefs, in the presence of extrinsic noise. [Peter 1986]

General equilibrium model insists on the hypothesis that agents expect future prices rationally. In general, equilibrium form, rational expectation hypothesis is common knowledge among the agents of the economy, where the competitive rational expectations mechanism functions smoothly.

Agents with full expectations, make use of all the information. In general equilibrium theory assumptions are made that the economic representation and also agents that rationally there was common information to all agents and were to fully exploit this knowledge. This assumption was to explain the model [Emilio 2003].

General equilibrium theory under certainty is able to show that agent’s choices are compatible in a perfectly competitive market when they pursue their self-interest different from the certainty environment, without this assumption.

In a dangerous surrounding, the rational expectations hypothesis it is important to understand the agent’s actions and also the rational expectations equilibrium.

The rational expectations theory is required to show some parameters anticipated on the up coming prices taken by the agent according to his behavior. [Ben 1998]

Without this assumption or related one it would be difficult determine the relevance in a perfectly competitive market, the agent’s decisions in accordance to the rational expectations theory.

The economy do not waste information and expectation are determined by the structure of the whole system. [Robert and Thomas 1988.]

Expectations of financial variables would be subject to mistakes, without being for recognized for sometime as a significant portion of most justifications for changes in the point of business actions expectations of the company, or generally, the individual probability circulation of result have a tendency of been distributed, for the similar information determine the forecast of the hypothesis or the objective possibility of circulation of results. [Michael 1992]

According to the theory, information is limited, and is not wasted by the economic system. The means by which expectations are created depends particularly on the organization of the appropriate structure describing the financial system a community forecast does not have any significant consequence on the function of the economic arrangement unless it is in relevant to the inside information.[Rodney and Michael 1982].

General equilibrium theory has shed light on the rational expectation theory by the several ways, for instance, People consider rational expectations, to keep the economy at equilibrium.

More convectional outcome relating to the potential responsibility and extent of state economic involvement in large-scale policy were re-establish after the rational expectations were given in combination with the hypothesis instead of those of faultlessly working markets that had at all times been the easy perception of the Keynesian perspective. [Davidson 2002]

It helps in shedding light on whether or not the financial system is able to convey to any type of harmonized equilibrium at all. The financial system produces a some insight on how large-scale policy operates and specifically regarding the function it plays in destabilizing or stabilizing the financial system, bringing it nearer to or taking it further away from a rational expectation equilibrium fully employed.[Hyman 2008]

Rational expectation is sensible only if the populace is able to learn macroeconomics associations from the experience of staying in the financial system and the traditional consistency theorem in statistical assumption do not signify that these connections are actuality learnable for the reason that they are self referential in the nature of macroeconomic study.

That is, statistical hypothesis assures that, under relatively general circumstances people are supposed to be able to consistently estimate connections from observing an extended enough sequence of data brought about by those relationships [Bryant 2010].

In macroeconomics the connections come about, when people change their expectation of price increase due to recent experience and hence affecting the actual rate of inflation.

[Frydman and Phelps 1983].It also helps understand whether or not the effort to find out about a system whose properties meet the rational expectations equilibrium is possible.

Light is also shed on the time varying temperament of the rational equilibrium theory within general equilibrium stochastic form [Sargent 1993].

In conclusion, all the theories, that is, the general equilibrium theory, rational expectation theory, and the monetarist theory are all connected or related.

Rational expectation theory puts together a variation of the expectation hypothesis with a monetary rule view and the general equilibrium hypothesis view. [Esther 1998]

References List

Bryant, W. D., 2010. General equilibrium theory and evidence. Hackensack N. J. world scientist Publishers. Singapore, Singapore.

David, C. C., 2006. Post Walrasian macroeconomics, beyond the dynamic stochastic general equilibrium model . Cambridge University, Cambridge.

Davidson, P., 2002. Financial Markets, Money, and the Real World . Edward Elgar, Cheltenham.

Emilio, B., 2003. Financial markets theory, Equilibrium, efficiency and information. Springer, London.

Esther, M. S., 1998. The evolving rationality of rational expectations: an assessment of Thomas Sergeant’s achievements. Cambridge university press, Cambridge.

Esther, M. S., 1998. Changing perceptions of economic policy: essays in honor of the seventieth birthday of Alec Cairncross. Malden publishers. London. Pg 162

Hyman, P. M., 2008.Stabilizing an unstable economy. McGraw-Hill Publishers, New York.

Irvin, B. T., 2011.Macroeconomics for today. Southwestern publishers. Mason, Ohion.

James, T., 1969. ‘A general equilibrium approach to monetary theory’. Journal of Money, Credit and Banking, Vol.1, pg 15-29.

Keizo, N., 1981, Macroeconomic dynamics . Cambridge University press. Cambridge, UK.

Laidler and David, E. W., 1984. ‘Misconceptions about the real bills doctrine a comment on sergeant and Wallace ‘, Journal of Political Economy . Pg. 149-155.

Lain Begg and S. G. B. Henry, 1998. Applied economics and Public Policy. University of Cambridge, Cambridge. Pg 63

Marc, R.T., 1984. An institutionalist guide to economics and public policy . Armonk, N.Y Publishers, Sharpe.

Michael, T. Belongia, 1992.The business cycle: theory and evidence: proceedings of the Sixteenth Annual Economic Policy Conference of the Federal Reserve Bank of St. Louis. Kluwer Acad. Publ., Boston. Pg 112

Peter Flaschel, 2009. The Macro dynamics of capitalism elements for a synthesis of Marx, Keynes and Schumpeter . Heidelberg Springer, Berlin. Pg 14

Peter Wallace Preston, 1986. Making sense of development: An introduction to classical and contemporary theories of development and their application to Southeast Asia. Routledge and Kegan publishers, New York, London. Pg 226

Robert, E. L. and Thomas, J.S., 1988. Rational expectation and econometric practice. University of Minnesota press, Minneapolis.

Roger, G., 2001. Sunspot multiplicity and economic fluctuations . MIT Press, Cambridge, UK.

Roger, E. A., 1999. The macroeconomics of self-fulfilling prophecies . MIT Press. Cambridge, UK.

Sylee, 1990. The monetary and banking development of Singapore and Malaysia. Singapore University press, Singapore.

William O. W. and Alain T., 2006. The Blackwell dictionary of modern social thought . Malden Publishers. Oxford, London.

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