Friday, August 5, 2011

Why do economist consider prices that are too low to make a profit (but zero loss) artificial?

If people cannot make a profit at a given activity, they will switch to another activity until equilibrium returns to the market. The only way that they will remain in their current activity making no profit is if they are prevented from making the switch by external forces. In a free market, people would leave the profession, so it is considered to be artificial.

No comments:

Post a Comment