Aggregate Demand and Aggregate Supply (UXL)
|
|
- Joel Shepherd
- 6 years ago
- Views:
Transcription
1 Aggregate Demand and Aggregate Supply (UXL) Microeconomics, the study of the economic decisions of individuals and companies, is based on the laws of supply and demand. Supply refers to the amount of a particular product that producers are willing and able to sell at a given price. Demand refers to the amount of a particular product that consumers are willing to buy at a given price. The law of demand states that when prices for a product rise, people's demand for the product will fall. These effects are often represented on a graph. For demand, the price level is shown on the vertical axis, and the amount demanded is shown on the horizontal axis. A line between a point on the vertical axis and a point on the horizontal axis, known as the graph's curve, slopes downward, showing that the demand for a product is lower when the price is higher, and higher when the price is lower. Oranges damaged by unexpected freezing temperatures hang from a tree in a grove in California. Crops of all types can be damaged by bad weather, limiting the supply and driving up prices for consumers. JUSTIN SULLIVAN/GETTY IMAGES Macroeconomics is the study of the economic decisions and actions of the economy as a whole. Supply and demand in macroeconomics mean different things than they do in microeconomics. In macroeconomics, supply refers to the total quantity of goods and services that producers throughout the entire economy are willing to supply at a certain price level. Demand refers to the total quantity of goods and services that all consumers in the economy are willing to buy at a given time. The aggregate demand curve shows that as the overall price level in an economy increases, aggregate demand for goods and services decreases. With this curve, the vertical axis represents the total price level of the economy. The horizontal axis represents the quantity of goods and services that all sectors of the economy households, firms, and the government are willing and able to provide at each price level. When overall prices in the economy are higher, demand for goods and services is lower, so the curve slopes downward. The horizontal
2 axis is sometimes labeled output, the amount of goods and services produced by a business or country. In this case, output refers to an entire country's output. Sometimes the horizontal axis is labeled income, because a country's total income, that earned by everyone in the country, equals its total output. When prices in the economy change, it is represented as movement up and down the demand curve. For consumers, when prices go up, people's purchasing power (the financial ability to buy goods and services) decreases. In other words, their money buys less. As for businesses, when prices rise, the interest rate usually rises too. The interest rate is the amount lenders charge borrowers, expressed as a percentage of the amount borrowed, for the privilege of borrowing money. This rise in the interest rate means that businesses have to pay more interest on money they borrow to invest. So they will invest less. Government spending does not change by price level. Rising prices may also affect net exports, or the total value of U.S. exports of goods and services made in the U.S. minus the total value of U.S. imports of goods. If prices of U.S.-made goods and services rise, U.S. consumers, both in the U.S. and abroad, may begin to buy similar imported goods instead. Therefore, net exports will decrease. Shifts in the demand curve Sometimes, aggregate demand can change in response to factors other than price levels. These changes shift the entire aggregate demand curve along the graph. A decrease in aggregate demand is represented as a move of the entire demand curve to the left on the Aggregate Demand Curve CENGAGE LEARNING graph. This shift leftward means that consumer demand is lower at every price level. A shift rightward, in contrast, means that consumer demand is higher at every price level. A sudden event that increases or decreases demand temporarily is called a demand shock. An event that increases demand is a positive demand shock, and one that decreases demand is a negative demand shock. For instance, in 2008, housing prices across the United States began falling quickly. This sudden price drop was a demand shock that started an economic downturn. Natural disasters can also cause negative
3 demand shocks. Shocks happen with regard to individual products and services too. For example, a media report that a particular food is very healthful will be a positive demand shock with regard to that food, whereas a report that the food is very unhealthful could be a negative demand shock. Confidence in the economy (or a lack of it) has significant effects on aggregate demand. When consumers feel confident that their jobs are secure, that the value of their homes is increasing, or that their stocks will perform well, they will demand more at every price level. This becomes a self-reinforcing effect: Consumer demand and spending stimulates the economy, employment is high and jobs are stable, and so demand and spending increase. Businesses, too, feel confident that their businesses will do well, so they hire more workers and invest in new equipment. On the other hand, if consumers worry about keeping their jobs, the value of their homes declining, paying off their loans, or paying higher prices in the future, they will cut back on their spending. Businesses, too, will cut spending. The decreased spending becomes self-reinforcing, too; consumer demand drops, businesses lay off workers, and the downward spiral continues. Government policies can affect demand, and this is a major goal of fiscal policy. Raising taxes can shift the demand curve to the left, decreasing demand, because consumers and businesses have less money to spend. To increase demand in times of recession, governments take two approaches. They cut taxes and offer credits and rebates during recessions. Consumers will have more money to spend so consumer demand will increase; tax incentives for businesses spur them to invest. Governments can also increase their own spending during recessions to keep people employed and provide some income and security for those who become unemployed or have low incomes. Trade policies, both those of the United States and those of other nations, can also affect aggregate demand. When other countries reduce their tariffs (taxes on imports or exports) on U.S. goods, as happens with free-trade agreements, U.S. goods are cheaper for people there to buy, and U.S. exports increase. When countries open to trade or develop their economies, economic demand increases, which means that they buy more U.S. products. On the other hand, if countries increase tariffs on U.S. goods, the goods become more expensive for consumers there, and U.S. exports decrease. Aggregate supply curves in the short and the long run In microeconomics, the law of supply states that producers supply more of a good or service when its price rises. The supply curve, like the demand curve, shows price on the vertical axis and amount supplied on the horizontal axis. For aggregate (total) supply, a macroeconomic factor, the vertical axis represents the price level in the economy as a whole. The horizontal curve represents total output in the economy. This level of production happens when firms combine the inputs of equipment and labor to produce output. Unlike the microeconomic supply curve, though, the aggregate supply curve is different in the short run and in the long run. At first, when price levels in the economy increase, firms produce more, so aggregate supply in the country increases. This increase occurs only in the short run, though, so on
4 a graph, this is represented by the short-run aggregate supply curve. This curve slopes up, just like a microeconomic supply curve. The supply increase does not go on forever. Output is dependent on input, or the land, equipment, and labor used to produce output. Eventually, since overall price levels in the economy are rising, the price of inputs will increase too. For instance, sooner or later, employees will ask for higher wages because their cost of living has increased. For businesses, higher input costs cancel out the effect of higher revenues. Profits return to where they were before the new price level, and businesses return to their original level of production. But these input costs usually increase more slowly than final prices. Economists say that input prices are sticky, meaning that they stick to their original level for a while before they change. For instance, unions negotiate contracts that determine wages only once every several years, and many nonunion jobs change wages just once a year. So employees do not see an increase in wages for a period of time after price levels in the economy have increased. For prices of other inputs, too, such as food, there may be a contract between suppliers and the price-setting firm that is in effect for a certain time. The long run, to economists, is the period of time it takes for those sticky input prices to adjust to the overall economy's price-level changes. Therefore, the curve on a graph that represents aggregate supply in the long run, called the long-run aggregate supply (LRAS) curve, is not influenced by overall prices in the economy. It is represented on the graph as a vertical line at a certain level of output. Why the aggregate supply curve shifts Like the aggregate demand curve, the aggregate supply curve also can shift. Changes to any of the inputs used in production will shift the amount of output that firms are willing and able to produce. Supply shocks are sudden events that increase or decrease overall production in the short run. For example, a plentiful harvest could increase the food supply in the short run, and a drought could decrease it. In 1974, crop failures around the world decreased the food supply. A sudden rise in oil prices, as occurred in 1973, could decrease the amount of output businesses can produce. When firms expect higher input prices in the future, they will produce less at every price level in anticipation of their costs rising; however, the LRAS would shift only if those expectations came true.
5 Short and Long Run Aggregate Supply Curves CENGAGE LEARNING Anything that affects inputs permanently can cause shifts in the LRAS. Inputs traditionally include land, capital, and labor, but many experts also include technology as an input. Discovery of new reserves of oil, a natural resource, can increase production at every price. But depleting oil reserves could decrease aggregate supply. New technologies to increase crop yield could increase aggregate supply, but climate change could reduce the amount of land available for farming, decreasing aggregate supply. The number of workers will decrease across the economy over the next twenty years as baby boomers (members of a large generation born between 1946 and 1964) retire, which will in turn decrease aggregate supply. But when immigrants enter the country and join the labor force, aggregate supply increases. Improvements in a country's education system, resulting in better-trained workers, can also increase aggregate supply. When the longrun supply curve shifts, the short-run supply curve also shifts.
MACROECONOMICS - CLUTCH CH AGGREGATE DEMAND AND AGGREGATE SUPPLY ANALYSIS
!! www.clutchprep.com CONCEPT: AGGREGATE DEMAND The aggregate demand and aggregate supply model (AD-AS Model) explains short-run fluctuations in GDP and price Aggregate Demand is closely related to our
More informationAGGREGATE DEMAND AND AGGREGATE SUPPLY
33 AGGREGATE DEMAND AND AGGREGATE SUPPLY WHAT S NEW IN THE FOURTH EDITION: The section on How the Short Run Differs from the Long Run, now entitled The Assumptions of Classical Economics, has been completely
More information2.2 Aggregate Demand and Aggregate Supply
2.2 Aggregate Demand and Aggregate Supply Aggregate Demand (AD): the total spending on all goods and services in an economy at a given price level over a period of time. The macroeconomic concept of aggregate
More informationEdexcel Economics (A) A-level Theme 2: The UK Economy - Performance and Policies 2.3 Aggregate Supply
Edexcel Economics (A) A-level Theme 2: The UK Economy - Performance and Policies 2.3 Aggregate Supply Detailed Notes 2.3.1 The characteristics of Aggregate Supply The AS curve: Aggregate supply is the
More informationLESSON 9. Economic Fluctuations: Balancing Aggregate Demand and Supply
LESSON 9 Economic Fluctuations: Balancing Aggregate Demand and Supply Assigned Reading 1. Mankiw, N. Gregory, et al. 2011. Principles of Macroeconomics (5 th Canadian Edition). Toronto: Thomson Nelson.
More informationAggregate Demand & Aggregate Supply
Business Environment.2 Week 4 Aggregate Demand & Aggregate Supply 1 Objectives To appreciate how a change in the price level affects aggregate demand and aggregate supply. To understand how aggregate supply
More informationAgenda. The IS LM / AD AS Model: A General Framework for Macroeconomic Analysis, Part 2. The AD Curve. Aggregate Demand and Aggregate Supply
Agenda Aggregate Demand and Aggregate Supply The IS LM / AD AS Model: A General Framework for Macroeconomic Analysis, art 2 22-1 22-2 Aggregate Demand and Aggregate Supply The AD-AS model is derived from
More informationEconomics Challenge Online State Qualification Practice Test. 1. An increase in aggregate demand would tend to result from
1. An increase in aggregate demand would tend to result from A. an increase in tax rates. B. a decrease in consumer spending. C. a decrease in net export spending. D. an increase in business investment.
More informationBuilding a Model of Aggregate Demand and Aggregate Supply *
OpenStax-CNX module: m63807 1 Building a Model of Aggregate Demand and Aggregate Supply * OpenStax Based on Building a Model of Aggregate Demand and Aggregate Supply by OpenStax This work is produced by
More informationFixed and flexible prices
Fixed and flexible prices Giovanni Di Bartolomeo giovanni.dibartolomeo@uniroma1.it Note: These lecture notes are incomplete without having attended lectures Time horizons in macroeconomics Long run rices
More informationShort-Run & Long-Run Effects on the economy. A.P. Economics Unit 5: Stabilization Policies Ms. Trimels
Short-Run & Long-Run Effects on the economy A.P. Economics Unit 5: Stabilization Policies Ms. Trimels Short-run effects on Aggregate Demand Aggregate Demand will either increase or decrease following any
More informationMidterm I (100 Points) AGEC 5343 Posted: Tuesday, Due Date: Wednesday, 11:00 PM, September 23, 2009
Midterm I (100 Points) AGEC 5343 Posted: Tuesday, 9-22-09 Due Date: Wednesday, 11:00 PM, September 23, 2009 Your Name Section I: The Theory of Comparative Advantage. Considering Table 1 (for the U.S. and
More informationShort run aggregate supply
Short run aggregate supply Syllabus snapshot Today we are going to. 1. Understand what is meant by the term short run aggregate supply. 2. Understand why the SRAS curve is upward sloping. 3. Understand
More informationCopyright 2017 by the UBC Real Estate Division
DISCLAIMER: This publication is intended for EDUCATIONAL purposes only. The information contained herein is subject to change with no notice, and while a great deal of care has been taken to provide accurate
More informationChapter 26 Answers to Short-Answer, Essays, and Problems
Chapter 26 Answers to Short-Answer, Essays, and Problems 1. Why is there a need for an aggregate demand and aggregate supply model of the economy? Why can t the supply and demand model for a single product
More informationMacroeconomic Equilibrium: Aggregate Demand and Supply. Economics, 7th Edition Boyes/Melvin
Macroeconomic Equilibrium: Aggregate Demand and Supply Economics, 7th Edition Boyes/Melvin Aggregate demand = total spending in the economy at alternative price levels. Aggregate supply = total output
More informationModule 18 Aggregate Supply: Introduction and Determinants
Module 18 Supply: Introduction and Determinants What you will learn in this Module: How the aggregate supply curve illustrates the relationship between the aggregate price level and the quantity of aggregate
More informationChapter 1: Managers and Economics
Economics for Managers by Paul Farnham Chapter 1: Managers and Economics 1.1 The best time for a managerial angle on life 1.2 What happened on the global markets in the last year? Governments designing
More informationAppendix A. The horizontal axis measures both GDP and Sales. The vertical axis measures the average price level.
eaching Business Cycle Dynamics: A Comparison of Graphs and Loops 5-17 Appendix A A diagram might help visualize the sticky price theory in action. Here is part of it -- a graph with a horizontal axis
More informationMacro CH 23 sample test question
Class: Date: Macro CH 23 sample test question Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Potential GDP is defined as a. the level of GDP created by
More informationIndividual & Market Demand and Supply
Mr Sydney Armstrong ECN 1100 Introduction to Microeconomic Lecture Note (3) Individual & Market Demand and Supply The tools of demand and supply can take us a far way in understanding both specific economic
More informationEconomic fluctuations are facts of life. If you need a reminder, look back
CHAPTER 26 AGGREGATE DEMAND AND AGGREGATE SUPPLY CHAPTER OUTLINE The Aggregate Demand Curve The and the Money Market Deriving the Aggregate Demand Curve Understanding the AD Curve Movements Along the AD
More informationEco402 - Microeconomics Glossary By
Eco402 - Microeconomics Glossary By Break-even point : the point at which price equals the minimum of average total cost. Externalities : the spillover effects of production or consumption for which no
More informationChapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis
Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Yulei Luo SEF of HKU March 31, 2015 Luo, Y. (SEF of HKU) ECON2102CD/2220CD: Intermediate Macro March 31, 2015 1 / 36 Chapter
More informationChapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis
Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Yulei Luo SEF of HKU November 13, 2013 Luo, Y. (SEF of HKU) ECON2220: Macro Theory November 13, 2013 1 / 36 Chapter Outline
More informationChapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis
Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Yulei Luo Econ HKU November 13, 2017 Luo, Y. (Econ HKU) ECON2220B: Intermediate Macro November 13, 2017 1 / 36 Chapter Outline
More informationFactors of Production and Factor Markets
Factors of Production and Factor Markets Factors of production: the inputs used to produce goods and services. Labor Land Capital: the equipment and structures used to produce goods and services. Prices
More informationChapter 33: Aggregate Demand and Aggregate Supply Principles of Economics, 8 th Edition N. Gregory Mankiw Page 1
Page 1 1. Introduction a. We now turn to a short term view of fluctuations in the economy. b. This is the chapter that made this book controversial as Mankiw tends to ignore the Keynesian framework contained
More informationChapter 1. Introduction: What Is Economics? Microeconomics: Principles, Applications, and Tools NINTH EDITION
Microeconomics: Principles, Applications, and Tools NINTH EDITION Chapter 1 Introduction: What Is Economics? Economics is the science of choice, exploring the choices made by individuals and organizations.
More informationUnderstanding the AD-AS Model: Aggregate Demand-Aggregate Supply
Understanding the AD-AS Model: Aggregate Demand-Aggregate Supply (actually it s AD-SRAS-LRAS) It is the foundation of realsector models of macroeconomics, including the Classical Theory and Keynesian Theory.
More informationMark Scheme (Results) January Pearson Edexcel International Advanced Level (IAL) Economics (WEC02) Unit 2
Scheme (Results) January 2014 Pearson Edexcel International Advanced Level (IAL) Economics (WEC02) Unit 2 Edexcel and BTEC Qualifications Edexcel and BTEC qualifications are awarded by Pearson, the UK
More informationLecture 10: THE AD-AS MODEL Reference: Chapter 8
Lecture 10: THE AD-AS MODEL Reference: Chapter 8 LEARNING OBJECTIVES 1.What determines the shape of the aggregate demand (AD) curve and what factors shift the entire curve. 2.What determines the shape
More informationIntroduction. Learning Objectives. Chapter 11. Classical and Keynesian Macro Analyses
Copyright 2012 Pearson Addison-Wesley. All rights reserved. Chapter 11 Classical and Keynesian Macro Analyses Introduction During the latter half of the 2000s, annual rates of U.S. real GDP growth varied
More informationChapter 4 DEMAND. Essential Question: How do we decide what to buy?
Chapter 4: Demand Section 1 Chapter 4 DEMAND Essential Question: How do we decide what to buy? Key Terms demand: the desire to own something and the ability to pay for it law of demand: consumers will
More informationChapter 1. Introduction: What Is Economics? Macroeconomics: Principles, Applications, and Tools NINTH EDITION
Macroeconomics: Principles, Applications, and Tools NINTH EDITION Chapter 1 Introduction: What Is Economics? Economics is the science of choice, exploring the choices made by individuals and organizations.
More informationDemand & Supply of Resources
Resource Markets 1 Demand & Supply of Resources Resource demand Firms demand resources As long as marginal revenue exceeds marginal cost To maximize profit Resource supply People supply resources To the
More informationORGANIZING YOUR THOUGHTSII Use the diagram to help you take notes. Supply and prices are related. Indicate how they are related in the diagram.
Chapter 21, Section 1 For use with textbook pages 462 465 What Is Supply? KEY TERMS supply the various quantities of a good or service that producers are willing to sell at all possible market prices (page
More informationCHAPTER 3. Economic Challenges Facing Contemporary Business
CHAPTER 3 Economic Challenges Facing Contemporary Business Chapter Summary: Key Concepts Opening Overview Economics Microeconomics Macroeconomics A social science that analyzes the choices people and governments
More informationEconomics. 18 this chapter, The Markets for the Factors of Production. look for the answers to these questions: N. Gregory Mankiw.
C H A T E R In 8 this chapter, look for the answers to these questions: The Markets for the Factors of roduction R I N C I E S O F Economics N. Gregory Mankiw remium oweroint Slides by Ron Cronovich 29
More informationChapter 5:1 Understanding Supply
Chapter 5:1 Understanding Supply Necessity versus Luxury Objectives: We will explain the law of supply. We will interpret a supply schedule and a supply graph. We will examine the relationship between
More informationChapter 1. Learning Objectives 1.1 WHAT IS ECONOMICS? Introduction: What Is Economics?
Chapter 1 Introduction: What Is Economics? Economics is the science of choice, exploring the choices made by individuals and organizations. Prepared By Brock Williams Learning Objectives 1. List the three
More informationEOCT Test Semester 2 final
EOCT Test Semester 2 final 1. The best definition of Economics is a. The study of how individuals spend their money b. The study of resources and government c. The study of the allocation of scarce resources
More informationExam #1 Time: 1h 15m Date: February Instructor: Brian B. Young. Multiple Choice. 2 points each
Economics 211 Macroeconomic Principles Exam #1 Time: 1h 15m Date: 19 21 February 2013 Name The value of this exam is 100 points plus 10 points for the Bonus Question. Instructor: Brian B. Young Please
More informationIntermediate Macroeconomic Theory, 01/07/2003. A Glossary of Macroeconomics Terms
A Glossary of Macroeconomics Terms The Digital Economist -A- Absolute Advantage A comparison of input requirements between two regions or countries where one country can produce a given level of output
More informationI can explain the law of supply and analyze changes in supply in response to price and determinants.
I can explain the law of supply and analyze changes in supply in response to price and determinants. Success Criteria: Identify determinants of supply and accurately graph changes in supply. Basics of
More informationThe Financial Market
In this presentation, we take a closer look at how the interest rate is determined in the financial market. The financial market consists of a demand for money, which is a positive function of the level
More informationBemidji Area Schools Academic Standards in. Social Studies
Bemidji Area Schools - Social Studies 2013 Tables of s Social Studies II Senior Economics Grades - Students in high school (grades -) pursue in-depth study of social studies content that equips them with
More informationIntroduction: What Is Economics? 6/5/2009. Economics: Principles, Applications, and Tools O Sullivan, Sheffrin, Perez 6/e.
1 of 34 2 of 34 Economics is the science of choice, exploring the choices made by individuals and organizations. P R E P A R E D B Y FERNANDO QUIJANO, YVONN QUIJANO, AND XIAO XUAN XU 3 of 34 1 A P P L
More informationMONETARY ACTIONS AND AGRICULTURE. Speech by Darryl R. Francis, President. Federal Reserve Bank of St. Louis
MONETARY ACTIONS AND AGRICULTURE Speech by Darryl R. Francis, President Before the Southern Farm Forum New Orleans, Louisiana January 23, 1975 It is good to have this opportunity to discuss with you some
More informationECO401 Latest Solved MCQs.
This year, if national product at factor cost is Rs. 500 billion, indirect taxes 150 billion and subsidies Rs. 50 billion, then national product at market prices will be: _ Rs. 700 billion. _ Rs. 650 billion.
More informationSupply and Demand Michael Powell, All Rights Reserved
Supply and Demand We have learnt that demand is the amount of a good or service consumers are willing to buy. The opposite of demand is supply. Supply is how much of a good or service a producer (a business)
More informationDEMAND AND SUPPLY. Chapter 3. Principles of Macroeconomics by OpenStax College is licensed under a Creative Commons Attribution 3.
DEMAND AND SUPPLY Chapter 3 Principles of Macroeconomics by OpenStax College is licensed under a Creative Commons Attribution 3.0 Unported License Demand for Goods and Services Demand refers to the amount
More informationNo 10. Chapter 11. Introduction. Real Wage Rigidity: A Question. Keynesianism: Wage and Price Rigidity
No 10. Chapter 11 Keynesianism: Wage and Price Rigidity Introduction We earlier described the Keynesian interpretation of the IS-LM AS-AD Model The Keynesian model assumes that there exists a horizontal
More informationA Glossary of Macroeconomics Terms
A Glossary of Macroeconomics Terms -A- Absolute Advantage A comparison of input requirements between two regions or countries where one country can produce a given level of output with less input relative
More informationCURRICULUM COURSE OUTLINE
CURRICULUM COURSE OUTLINE Course Name(s): Grade(s): 11-12 Department: Course Length: Pre-requisite: Microeconomics Social Studies 1 Semester Teacher Approved Textbook/Key Resource: McConnell and Brue Microeconomics
More informationPart II: Economic Growth. Part I: LRAS
LRAS & LONG-RUN EQUILIBRIUM - 1 - Part I: LRAS 1) The quantity of real GDP supplied at full employment is called A) hypothetical GDP. B) short-run equilibrium GDP. C) potential GDP. D) all of the above.
More informationNAME: Spring Chapter 21 Quiz. 1. Explain why the money demand curve is a decreasing function of the real interest rate.
NAME: Spring 2016 Chapter 21 Quiz 1. Explain why the money demand curve is a decreasing function of the real interest rate. (25 pts) Money demand refers to the amount of dollars an individual wants to
More informationProfessor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 2
Economics 2 Spring 2016 rofessor Christina Romer rofessor David Romer SUGGESTED ANSWERS TO ROBLEM SET 2 1.a. Recall that the price elasticity of supply is the percentage change in quantity supplied divided
More informationAgenda. The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis, Part 3. Disequilibrium in the AD-AS model
Agenda The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis, art 3 rice Adjustment and the Attainment of General Equilibrium 23-1 23-2 General equilibrium in the AD-AS model Disequilibrium
More informationMicroeconomics PART A. More Tutorial at
Microeconomics PART A 1. For Italy, the opportunity cost incurred when 6 cheeses are produced is 8 watches. For Switzerland, the opportunity cost incurred when 10 cheeses are produced is 50 watches. Which
More informationThe University of Zambia School of Humanities and Social Sciences The Department of Economics
The University of Zambia School of Humanities and Social Sciences The Department of Economics ECN 1115 INTRODUCTION TO MICRO ECONOMICS- ASSIGNMENT 1 Attempt ALL Questions and briefly explain why your answer
More informationSolutions. Question 1. Given what we have learned in class, which of the following statements are true and which false? (1 point each 6 points total)
QUIZ 7: Macro Winter 2008 Solutions Question 1 Given what we have learned in class, which of the following statements are true and which false? (1 point each 6 points total) a) In a short run equilibrium
More informationPrinciples of BABY THOMAS 2016
Principles of 1 UNIT I INTRODUCTION TO MACROECONOMICS Learning Objectives 1. Introduction to economics, meaning and definition of economics, Principles of economics 2. Economic models, the circular flow
More informationCHAPTER 29: AGGREGATE DEMAND AND AGGREGATE SUPPLY
~~~~~~~~... CHAPTER 29: AGGREGATE DEMAND AND AGGREGATE SUPPLY Introduction The aggregate demand-aggregate supply (AD-AS) model provides the primary graphic d~piction of changes in the macroeconomy. Shifts
More informationEconomics Marshall High School Mr. Cline Unit Two DA
Economics Marshall High School Mr. Cline Unit Two DA If you were running a business, what would you do if you discovered that customers were suddenly willing to pay twice as much for your product? If you
More information1 of 29. Aggregate Demand and Aggregate Supply. Economics: Principles, Applications, and Tools O Sullivan, Sheffrin, Perez 6/e.
1 of 29 2 of 29 As we explained in previous chapters, recessions occur when output fails to grow and unemployment rises. P R E P A R E D B Y FERNANDO QUIJANO, YVONN QUIJANO, AND XIAO XUAN XU 3 of 29 1
More informationWhat is Economics? / Define Economics / Introduction to Economics
What is Economics? / Define Economics / Introduction to Economics Economics is a social science that studies how individuals, governments, firms, and nations make choices on allocating limited resources
More informationThings people like and desire.
1 Wants 1 Things people like and desire. 2 Needs 2 Things you must have to live. 3 Scarcity 3 When there is not enough for all who want it. 4 Choice 4 To make a decision. 5 Goods 5 Things that can satisfy
More informationAP Microeconomics Chapter 3 Outline
I. Learning Objectives In this chapter students should learn: II. Markets III. Demand A. What demand is and how it can change. B. What supply is and how it can change. C. How supply and demand interact
More informationEconomics 101. Chris Gan July Economics 101 1
Economics 101 Chris Gan July 2010 Economics 101 1 What is Economics A study of charts, tables, statistics and numbers? Study of rational human behavior in pursuit to fulfill needs and wants Problem we
More informationLesson 10: Specific-Factors Model (continued)
International trade in the global economy 60 hours II Semester Luca Salvatici luca.salvatici@uniroma3.it Lesson 10: Specific-Factors Model (continued) 1 1 Specific-Factors Model The Home Country Opportunity
More informationPrinciples of Macroeconomics
Principles of Macroeconomics Academic Program: MSc in Banking and Finance Semester: Spring 2012/13 Instructor: Dr. Nikolaos I. Papanikolaou Office: Luxembourg School of Finance, KB2-E02-21 Phone: (00352)
More informationEOCT Study Guide for Economics
EOCT Study Guide for Economics 15 % of your total Grade. Review this study Guide and Notebook. This is a general guideline. You have to study the more specific concepts in your notes Domain I-Fundamental
More informationConcordia University Econ 201
Concordia University Econ 201 Department of Economics Shih-tse (Fred) Lo NOTE 3: MARKET DEMAND AND SUPPLY * Market An institution or mechanism that brings buyers (a.k.a. demanders, consumers), and sellers
More informationLecture 11: Real Business Cycles
Lecture 11: Most economists explain business cycles in terms of the sticky price model we have been discussing. That is, there is a short run aggregate supply curve so that when aggregate demand fluctuates,
More informationThe goods market. Screen 1
The goods market Screen 1 In this presentation we take a closer look at the goods market and in particular how the demand for goods determines the level of production and income in the goods market. There
More informationAn economist will define the exchange rate between two currencies as the:
ECO401 QUIZZ MORE Question # 1 of 15 ( Start time: 01:19:25 AM ) Total Marks: 1 The law of diminishing marginal utility indicates that the demand curve is: Vertical. U shaped. Upward sloping. Downward
More information[EPUB] THE SHORT RUN AGGREGATE SUPPLY CURVE WILL SHIFT TO THE:
07 March, 2018 [EPUB] THE SHORT RUN AGGREGATE SUPPLY CURVE WILL SHIFT TO THE: Document Filetype: PDF 520.76 KB 0 [EPUB] THE SHORT RUN AGGREGATE SUPPLY CURVE WILL SHIFT TO THE: Short run cost analysis would
More informationExploring the World of Business and Economics
Chapter 1 Exploring the World of Business and Economics 1 Discuss what you must do to be successful in the world of business. 2 Define business and identify potential risks and rewards. 3 Define economics
More informationChapter 11 Market-Clearing Models of the Business Cycle 108
Problems 1. The response to a temporary change in government spending in the real business cycle model is the same as the response to such a disturbance in the monetary intertemporal model, as the two
More information6) Refer to Table 2-1. What is Finland's opportunity cost of producing one cell phone?
Principle of Macroeconomics, Chapter two Chapter three Summer B, 2017, FIU Chapter two 1) The principle of is that the economic cost of using a factor of production is the alternative use of that factor
More informationECON 1000 Contemporary Economic Issues (Summer 2018) How a Market System Functions
ECON 1 Contemporary Economic Issues (Summer 218) How a Market System Functions Relevant Readings from the Required Textbooks: Chapter 4, Organizing Principles of Capitalist Systems Coda, I, Pencil Definitions
More informationWhat is economics? Economics is the study of how people use the limited economic resources to fulfill their unlimited needs of goods and services
What is economics? Economics is the study of how people use the limited economic resources to fulfill their unlimited needs of goods and services What are the economic resources? (factor of production?)
More informationThe Influence of Monetary and Fiscal Policy on Aggregate Demand. Chapter 32
The Influence of Monetary and Fiscal Policy on Aggregate Demand Chapter 32 Aggregate Demand Many factors influence aggregate demand besides monetary and fiscal policy. In particular, desired spending by
More informationECON 1000 Contemporary Economic Issues (Spring 2019) How a Market System Functions
ECON 1000 Contemporary Economic Issues (Spring 2019) How a Market System Functions Relevant Readings from the Required Textbooks: Chapter 4, Organizing Principles of Capitalist Systems Coda, I, Pencil
More informationLEARNING OBJECTIVES MACRO ECONOMIC
12.2A LEARNING OBJECTIVES MACRO ECONOMIC EQUILIBRIUM An analysis of the use of AD and AS in macro equilibrium Define aggregate demand and aggregate supply Describe the components of aggregate demand/supply
More information1 Macroeconomics SAMPLE QUESTIONS
Sample Multiple-Choice Questions Circle the letter of each correct answer. 1. The crucial problem of economics is (A) establishing a fair tax system. (B) providing social goods and services. (C) developing
More informationChapter 9: Labor Section 1
Chapter 9: Labor Section 1 Key Terms labor force: all nonmilitary people who are employed or unemployed outsourcing: the practice of contracting with another company to do a specific job that would otherwise
More informationJacob: W hat if Framer Jacob has 10% percent of the U.S. wheat production? Is he still a competitive producer?
Microeconomics, Module 7: Competition in the Short Run (Chapter 7) Additional Illustrative Test Questions (The attached PDF file has better formatting.) Updated: June 9, 2005 Question 7.1: Pricing in a
More informationPLe2 AD2. Ye2. Define: Aggregate demand is the demand for all goods and services in an economy.
1 QUESTION ONE: THE AGGREGATE SUPPLY AND DEMAND MODEL (a) Define the term unemployment. People who are willing and able to work can start work immediately, but are unable to find a job. Personal income
More informationSupply. Understanding Economics, Chapter 5
Supply Understanding Economics, Chapter 5 What is Supply? Chapter 5, Lesson 1 What is Supply?! Supply the amount of a product a producer or seller would be willing to offer for sale at all possible prices
More informationChapter 11 Technology, Production, and Costs
Economics 6 th edition 1 Chapter 11 Technology, Production, and Costs Modified by Yulin Hou For Principles of Microeconomics Florida International University Fall 2017 Technology: An Economic Definition
More informationECONOMICS REVIEW FINAL EXAM
ECONOMICS REVIEW FINAL EXAM UNIT 1 INTRO TO ECONOMICS FINAL EXAM REVIEW Unit 1 Economics is the study of how people satisfy their wants and needs when there are limited, or scarce, resources Microeconomics
More informationNotes On IS-LM Model: Application Econ3120, Economic Department, St.Louis University
Notes On IS-LM Model: Application Econ3120, Economic Department, St.Louis University Instructor: Xi Wang Introduction In this class note, we assembled the pieces of the IS-LM model as a step toward understanding
More informationProfessor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 4
Economics 2 Spring 2018 rofessor Christina Romer rofessor David Romer SUGGESTED ANSWERS TO ROBLEM SET 4 1.a. If the government increases the number of H-1B visas, this will increase the number of highskilled
More informationAggregate Demand Quiz.
Aggregate Demand Quiz www.onestudenttoanother.wordpress.com What does aggregate demand express? (A) The quantity of goods and services demanded in an economy (B) The quantity of goods and services produced
More informationWeek 5: The Costs of Production. 31 st March 2014
Week 5: The Costs of Production 31 st March 2014 WHAT ARE COSTS?! According to the Law of Supply:! Firms are willing to produce and sell a greater quantity of a good when the price of the good is high.!
More informationUnit 2 Supply and Demand
Unit 2 Supply and Demand Microeconomics - analyzes the Small Unit economic behavior of Individuals, Households and Firms to understand their decision-making process. -America s Free Enterprise- An economy
More information