ABSTRACT
This chapter applies the two-sector model of production and distribution to some standard problems of distribution theory and to the effects of policies and institutions designed to alter the distribution of income. In these applications, the chapter employs extensively an analytical technique that have found extremely useful for many such problems. It entails assuming that prices are held constant when a change occurs, examining the effects of the change on excess demands and supplies at those prices, and using the assumption of stability of equilibrium to predict the direction of price change required to restore equilibrium. It entails assuming that prices are held constant when a change occurs, examining the effects of the change on excess demands and supplies at those prices, and using the assumption of stability of equilibrium to predict the direction of price change required to restore equilibrium.
