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Samuelsonian Economics and the Twenty-First Century$
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Michael Szenberg, Lall Ramrattan, and Aron A. Gottesman

Print publication date: 2006

Print ISBN-13: 9780199298839

Published to Oxford Scholarship Online: January 2009

DOI: 10.1093/acprof:oso/9780199298839.001.0001

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Multipliers and the LeChatelier Principle

Multipliers and the LeChatelier Principle

(p.303) 19 Multipliers and the LeChatelier Principle
Samuelsonian Economics and the Twenty-First Century

Paul Milgrom

Oxford University Press

This chapter examines Samuelson's Le Chatelier principle of how the market responds to a change in parameters of demand and supply curves. It uses examples in demand theory, economic policy, and empirical research to illustrate the principle. It also stresses the flexibility of the principle to adapt to changing assumptions. Changes from the optimizing agents to equilibrium systems whose primary use is to provide a foundation for understanding multipliers are observed. The chapter evaluates the performance of the principle performed when confronted with local optimization problems as in production function settings, and in positive feedbacks systems as in gaming situations. The principle is found progressive in that it is able to capitalize on symmetric relations among substitutes and complements. In that regard, the principle has extended research into multiplier analysis, a research area that will continue into the 21st century.

Keywords:   Le Chatelier principle, optimization problems, restricted choice functions, positive feedback systems, equilibrium systems

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