Chapter 1 Stating the Economic Problem and Basic Principles

Classical theory – which also includes classical doctrines from both the marginal utility and in particular the mathematical schools of economic thought – has primarily focused on a market structure characterised by a large number of independent economic agents, or market participants, competing with one another. Here price is rightly regarded as a variable, independent of the behaviour of the individual. It appears that a well-defined equilibrium under this market can be derived from the given premise that such a market is therefore a functioning mechanism in the whole structure of the economy. In addition, the problem of monopoly in its narrowest sense has also been thoroughly investigated in some detail. It appears that when the supply sides or the demand sides are combined in the hand of a single economic agent, a similarly well-defined but different equilibrium occurs.