Returns to Scale, Information and Economic Growth
Where the theorist can be helpful is in sorting out the logical coherence of different kinds of assumptions. Typically, economic theory states the resource and technological limitations constraining the economy as a whole and individual agents within the economy, and postulates that the agents act rationally within these constraints. The constraints on individual agents derive in part from the constraints of the economy as a whole but in even greater measure from the very actions of other agents. The prices which an individual agent faces in his or her decisions are determined in one way or another by the aggregate choices of all the other agents.
KeywordsIndividual Agent Rational Expectation Technical Knowledge Imperfect Competition Wage Rigidity
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