Paradox of Rift: Principles of Microeconomics and Accounting Reconciled
16 Pages Posted: 25 Jun 2012
Date Written: June 12, 2012
Abstract
The paper first cites Ronald Coase, who was awarded in 1991 the Nobel Prize in Economics, on his explanation why he studied accounting and not economics while a student at the London School of Economics from 1929-1931. It then explores the relationship between the diagrams of microeconomics and the balance sheet and income statement for a price-taking firm as management responds to a price change in the short and long run. Accounting and economic depreciation are distinguished. Finally the relationship between profit maximization and maximization of the firm's contribution margin is explored.
Keywords: Ronald Coase, microeconomics, financial statements, depreciation, accounting and economic
JEL Classification: A12
Suggested Citation: Suggested Citation