EQUATION of EXCHANGE

SSET O9 – EQUATION of EXCHANGE

The Causal – natural correlation of exchange since our previous work SSET 7), arise from equation developed in the new Subjective and Solidarity Economic Theory (SSET). Let us see:

General equation of decreasing marginal utility of wealth : U_q = q_t / q_i .Relative value of wealth : v_q($) = U_q / U_$.Equation of exchange : U^r_q($) = U_q($) * v_$(q) = U_$ .

The following show a geometric expression of the equations mentioned:

Exchange graph

v_$(q) = U_$ / U_q = 1,875 / 1,786 = 1,05

U^r_q($) = U_q($) * v_$(q) = 1,786 * 1,05 = 1,875  = U_$

Equation of the Exchange : the relative marginal utility of an economic good is equal to the marginal utility of the other economic good to which it is relative (exchanged and/or compared) .

Carlos A. Bondone