Fallacy of Composition: Indifference Curve and PPF

 

The market as featured in economics is a typical microcosm out of indefinitely many markets for trade in goods, services, rental rights, physical or intellectual assets and credits or other financial instruments. By conception, there in each and all the markets surely is the unit of account (U), such as $, €, ¥ or ₤, dictated by the sovereignty.

             Moreover, there on each side of demand or supply is absolutely no budget limit to each and all participants. Each item such as the apple takes the infinitesimal, so to speak, out of the whole budget for all the utilities of various disguises of all the members of each household; the same for all the participating households in the market of the community.

             Here we make a thought experiment, or a scenario game of imagination. We apply the market logic to the consumer choice model et cetera.

 

19) The Indifference Curve

             To begin, this Model represents a macrocosm. There is only one good generally represented as the x good on the abscissa, with the single unit of account as the y good on the ordinate. In essence, the x good (M∙U in dimension) is to the economy what the y good is to the legal tender (U∙m in dimension).

             Now, enter economy (in the meaning of efficiency, or the logic of economy 经济 jīngjì) in general or the market paradigm in particular. First of all to the rest of us, all that matters at the end of the day, when in economics as well as in economy, is the utility (M∙U). Second of all, the most fundamental currency (U∙m) is the time (T in dimension) to all of us if exogenous to Cambridge.

             See we told you so “many times over”: There is no such thing as time dimension in Cambridge macroeconomics. Probably because the time is of no use to them until……

            Efficiency must be accounted for per (/ or slash) period of time, namely in M∙U∙T^-1. By the wayside, the American economist Hal Varian suggests that consumer “taste” or “preference” as parameter is not supposed to vary in the defined accounting period, say, a week for apples or a month for potatoes (Intermediate Microeconomic, Ch.7).

             Then, the indifference curve: It represents the locus of M_x∙U_x∙T^-1=M_y∙U_y∙T^-1 (in dimensions) for and only for the week or the month of accounting. Further on, replace U with p (U∙m) and M with q (M) from the market, as at the extension of the Model: Anyone will get q_x∙p_x= q_x∙p_y over the period. It’s the definition of indifference curve in the first to last place.

            In fine, bring in the budget constraint of macrocosm. Much like GDP (Y) per annum, the aggregate household income per mensis is no less limited than our time in Here is limited. As a nemesis, the equation in the same period of accounting (T^-1) varies to q_x∙p_x+ q_x∙p_y= k as “constant” as the k in the “Cambridge Quantity equation M= k∙I ” of J.R. Hicks (1937).

             That’s “the Whole Story” Anderson Cooper talks about. Ergo, q_x∙p_x= q_x∙p_y=½ k each. Where is the curve, of indifference or anything else? Where is the backward bending? Umm, thou wouldst not recognize a curve of dots (L⁰∙M⁰∙T⁰). 

             A dot is imaginary, Peters, Pauls and Marys! Q_x∙p_x= ½ k represents if anything the abscissa (L¹) of his Imagination; and, q_y∙p_y=½ k the ordinate (L¹) of her Imagination. Providentially, the coordinate is empty in its entirety from prenuptial (0) to eternal (∞). Avalokitesvara Bodhisattva! 

            Farewell also to the Peter…..and D.E.I by the way of Republic.

Insult to injury. What is tasteful to consumers at the household is not necessarily in sync with the preference of the shopper aka the demander. Well, the taste of Denis the Menace home is often the opposite of Mom’s “preference” in the market

 

20) The Production Possibility Frontier

             First of all, this is all about efficiency in production. Second of all, “The only purpose of production is consumption” as Adam Smith talked about.

             Again, It’s the efficiency, or M_x∙U_x∙T^-1=M_y∙U_y∙T^-1, Sir! We do not repeat the “pretty much standard” story, partial or whole, for the sake of Saving Private Time, the ultimate currency ante mortem of all the creatures Here on Earth.

The Isoquant. This is more than 500 miles away from the so-called “labor market.” In modern times, by the way, we are not supposed to trade “labor” in the first place of market or anywhere else.

             The rest of us would never sell or buy labor (M∙U), but lend or rent the working hours (M∙U∙T). Either way, please no bending backward, now or ever, of the supply curve!

The Peter in the Middle, Rest in Equilibrium!