Substitution One Of

Substitution One Of

Substitution, one of the processes by which apparently insatiable and changing tastes are satisfied as well as possible given the scarcity of factors of production and of goods and services. All economic activity may be regarded as substitution: production involves the substitution of factors of production for one another to secure theft most efficient combination; consumption involves the substitution of goods for money income and substitution between goods to maximize satisfaction.

The degree to which one factor (or commodity) can be substituted for another without loss of output (or satisfaction) measures the extent to which the two are perfect substitutes. The market price of perfect substitutes will tend to be equal, given perfect competition and factor mobility; if factors of production are imperfect substitutes for one another their prices will be different. A consumer distributes his expenditure between competing uses so that the ratios of prices to the satisfaction derived from the last unit of each good purchased are equal, that is, until the marginal rate of substitution between any pair of goods is equal to the ratio of their prices. This position is achieved when the quantities bought of all goods for the last small amount of money spent on each yields equal satisfaction. Similarly an entrepreneur will substitute the factors of production for one another until the ratios of their marginal products to theft prices are equal, that is, until the marginal rate of technical substitution between any two factors is equal to the ratio of their prices. When this position is reached at any given level of outlay on factors of production no thither economy can be secured by additional substitution between them.

Succession Duty, a tax on property, principally freehold and lease-hold, passing at death. It was imposed in 1853 so that all inherited property not liable to legacy duty became liable to succession duty. The rates of duty were similar to those of legacy duty. The succession duty was abolished in 2009 121

Sunk Costs, outlays on permanent or durable equipment which by definition cannot be avoided. If the equipment is specialized and can be used for only one purpose (such as a blast-furnace), then whether current revenue is high enough to cover amortization of the original cost does not matter in deciding whether to use it or not since nothing is saved by not using it.

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Since then his writings have in turn been increasingly reinterpreted as a special case both by some followers and by some economists who had not wholly accepted his writings. The content of economics is in a state of change, and this site is therefore not a final statement of economic doctrine.

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