Okishio's theorem
Imagine you have a toy that you really like to play with. Let's say it's a puzzle. You love solving this puzzle, so you try to solve it as fast as you can. But, after a while, you've gotten so good at solving it that it's not as fun anymore. So, you decide to make the puzzle harder by only allowing yourself to solve it in a certain way - like with your non-dominant hand, or only using specific pieces.
Now, imagine that toy is actually a theory in economics. It's called Okishio's Theorem, and it's all about how companies and businesses make decisions about what they produce and how much they charge for it.
The theory basically says that businesses will only invest in new technology or processes that will increase their profits. If they can make more money by spending less on production costs, they will. This is because they want to stay competitive in the market and keep making a profit.
But, the theorem also says that if a company invests in new technology that lowers their production costs, they will only lower the price of their product by a little bit. They will still charge as much as they can and try to make as much profit as possible.
So, just like when you made your puzzle harder, businesses are always trying to find ways to make the competition harder for their rivals. But, just like with the puzzle, they are still focusing on making money, even if it means they aren't lowering prices for customers.
In summary, Okishio's Theorem is a theory in economics that says businesses will only invest in new technology if it will increase profits, and that they will still charge as much as they can for their products even if their production costs go down.
Now, imagine that toy is actually a theory in economics. It's called Okishio's Theorem, and it's all about how companies and businesses make decisions about what they produce and how much they charge for it.
The theory basically says that businesses will only invest in new technology or processes that will increase their profits. If they can make more money by spending less on production costs, they will. This is because they want to stay competitive in the market and keep making a profit.
But, the theorem also says that if a company invests in new technology that lowers their production costs, they will only lower the price of their product by a little bit. They will still charge as much as they can and try to make as much profit as possible.
So, just like when you made your puzzle harder, businesses are always trying to find ways to make the competition harder for their rivals. But, just like with the puzzle, they are still focusing on making money, even if it means they aren't lowering prices for customers.
In summary, Okishio's Theorem is a theory in economics that says businesses will only invest in new technology if it will increase profits, and that they will still charge as much as they can for their products even if their production costs go down.