Optimal Allocation of Resources
Up to now we have been concerned with the description and the analysis of how a market economy, composed of consumers and firms, actually behaves to allocate resources to produce products and to distribute incomes to be spent on them. Our study aims, of course, to consider basic principles of an abstract economy under ideal conditions rather than to describe the details of actual economies. However abstract it is, nevertheless, what we have studied is to be called the positive economics, since it is ultimately to be judged by facts. Ideal or perfect conditions are assumed merely from the point of view of the simplification of the consideration, and not meant to be desirable from some ethical point of view. Theory of perfect competition is, therefore, similar to the law of motion in vacuum.