...Aggregate Demand and Aggregate Supply Topic Question numbers 1. Aggregate demand 1-22 2. Long-run aggregate supply 23-27 3. Aggregate supply (short run) 28-63 4. Equilibrium; changes in equilibrium 64-125 5. Downward price and wage inflexibility 126-134 Consider This 135-136 Last Word 137-138 True-False 139-155 Appendix 6. AD in relation to the AE model 156-166 Multiple Choice Questions Aggregate demand Type: D Topic: 1 E: 193 MA: 193 1. The aggregate demand curve: A) is upsloping because a higher price level is necessary to make production profitable as production costs rise. B) is downsloping because production costs decline as real output increases. C) shows the amount of expenditures required to induce the production of each possible level of real output. D) shows the amount of real output that will be purchased at each possible price level. Answer: D Type: A Topic: 1 E: 194 MA: 194 2. The aggregate demand curve is: A) vertical if full employment exists. B) horizontal when there is considerable unemployment in the economy. C) downsloping because of the interest-rate, real-balances, and foreign purchases effects. D) downsloping because production costs decrease as real output rises. Answer: C Type: A Topic: 1 E: 194 MA: 194 3. The interest-rate effect suggests that: A) a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending...
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...Supplemental Unit 1. Demand, Supply, and Adjustments to Dynamic Change Note: The authors recommend that this feature be read along with Part I, Elements 6, 7, and 11 of Common Sense Economics. Common Sense Economics highlights how markets work and their impact on the allocation of resources. This feature will investigate this issue in more detail. It will use graphical analysis to analyze demand, supply, determination of the market price, and how markets adjust to dynamic change. Demand The law of demand states that there is a negative relationship between the price of a good and the quantity purchased. It is merely a reflection of the basic postulate of economics: when an action becomes more costly, fewer people will choose it. An increase in the price of a product will make it more costly for buyers to purchase it, and therefore less will be purchased at the higher price. The availability of substitutes—goods that perform similar functions—underlies the law of demand. No single good is absolutely essential; everything can be replaced with something else. A chicken sandwich can be substituted for a cheeseburger. Wheat, oats, and rice can be substituted for corn. Going to the movies, playing tennis, watching television, and going to a football game are substitute forms of entertainment. When the price of a good increases, people will turn to substitutes and cut back on their purchases of the more expensive good. This explains why there is a negative relationship...
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...would an economy be operating inside its PPF? On its PPF? Outside its PPF? Resources are employed efficiently when there is no change that could increase the production of one good without decreasing the production of the other good. Efficiency involves getting the most from available resources. Economy is efficient if it produces on the PPF. Points inside the PPF identify combinations that do not employ resources efficiently. Points outside the PPF identify unattainable combinations, given the availability of resources, technology, and rules of the game. Thus, the PPF not only shows efficient combinations of production but also serves as the boundary between inefficient combinations inside the frontier and unattainable combinations outside the frontier. 19. (Shifting Production Possibilities) Determine whether each of the following would cause the economy’s PPF to shift inward, outward, or not at all: A. An increase in average length of annual vacations Shifts inward- means that decrease in work hours- human capital B. An increase in immigration Shifts outward- human capital increases C. A decrease in the average retirement age Shifts outward- more old people will work than before giving contribution to human capital D. The migration of skilled worked to other countries Shifts inward Chapter 4 5. (Income Effects) When moving along the demand curve, income must be assumed constant. Yet one factor that can cause a change...
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... we still need to import resources in order to meet market demands; especially in seasonal produce. Since Mexico is such a close neighbor to the United States, trade between the two countries has been inevitable but also quite useful for both parties. Approximately $22.1 billion alone is spent on agricultural imports from Mexico annually into the United States(Ivanvova, 2017). Some of these agricultural resources include avocados and tomatoes, along with miscellaneous fruits and nuts as well. While this can help consumer markets stateside, we also can run into trouble when unforeseen circumstances can disrupt this trade. Circumstances such as poor crop yield and high demand can make for huge economic inflation of this product. Any conflict that may be occurring between the two countries can unfortunately cause problems for importing goods into the United States, as well as problems exporting any goods into...
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...3/30/2016 Expertly Written Sample Assignment on Demand and Supply Concept Order Now Login/Signup Search for Question, Subject, Course Name SERVICES » Free Samples » Demand and Supply of Certain Resources in Australia and Factors Other Than Price Which Affect Demand and Supply Demand and Supply of Certain Resources in Australia and Factors Other Than Price Which Affect Demand and Supply Question- How Demand and supply of certain resources in Australia and factors other than price which affect demand and supply? Contents Introduction Mechanism of Demand and Supply Analysis of demand and supply of certain resources of Australian Market: Conclusion Refrences Introduction Demand and supply are two important tools of micro economic analysis. Demand refers to how much quantity of a product is desired and purchased by a buyer at a given pricehttps://myassignmenthelp.com/freesamples/demandandsupplyofcertainresourcesinaustraliaandfactorsotherthanpricewhichaffectdemandand… 1/6 3/30/2016 Expertly Written Sample Assignment on Demand and Supply Concept level, where supply of a product represents how much quantity of a product that a market can offer at a given price-level. Demand and supply of a product depends on different factors. Demand of a product (suppose, X) depends on the price of that product (PX), price of the related commodities, consumers’ income, population or number of consumer, test and preferences of consumers...
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...Economics It is a fact that our wants exceed the productive capacity of our scarce resources. We want far more than was it is available to us; for that reason economics is important to us. But what is economics? Economics is primarily concerned with choices made by individuals, institutions, and society in seeking the best use of resources to produce valuable commodities. Our resources are limited therefore we are forced to make choices. Resources include the time people have available, labor, the land, buildings, equipment, tools, and the ability of the entrepreneur to combine them to create products and services. Economics affects practically everything we do. Everyday we have to make choices; that is what economic is about. You have to choose how to spend your time, how to live, which product to buy, and many more. In economics this is call opportunity cost; to obtain more of one thing, you forgo the opportunity of getting the next best thing. The opportunity of choosing a good or service over another depends on the utility, in other words, the satisfaction you obtained from consuming that good or service. Decisions are base on the greater utility you feel you get from a product or service. After having taken economic classes, I have realized day a day I use economic concepts. Daily I have choices to make which implies sacrifices. The everyday choice I have to make is whether to go to classes or stay sleeping. I like sleeping and resting and by going to class I gain...
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...Question One: If the demand for and supply of DVD players increased simultaneously, we could confidently predict an increase in the price of DVD players: | True | | | False | | Price will become indeterminate but quantity sold will increase. Please refer to page 60-61 of the textbook. Question Two: 'Because of unseasonably cold weather, the supply of oranges has substantially decreased.' This statement indicates that: | consumers will be willing and able to buy fewer oranges at each possible price | | | the equilibrium quantity of oranges will rise | | | the amount of oranges that will be available at various prices has declined | | | the price of oranges will fall | | The unseasonably cold weather has resulted in fewer oranges being supplied. The main factor is the unseasonal weather resulting in a decrease in supply shown by a leftward shift in the supply of oranges. Question Three: A decrease in the quantity of Mars bars demanded due to an increase in price involves: | a. a shift of the demand curve for Mars bars to the right | | | b. a shift of the demand curve for Mars bars to the left | | | c. a movement upward and to the left along the demand curve for Mars bars | | | d. a movement downward and to the right along the demand curve for Mars bars | | Supply and Demand shows that once the price rises of an object less of that object is demanded.. but once the price is lower more of the product is demanded...
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...Demand, Supply and Price Market Buyers- households/demanders Suppliers- producers/firms Demand-The ability and willingness to buy specific quantities of good at alternate prices in a given time period Or the desire to buy a product, which is backed up by willingness and ability to pay for the it. • Quantity demanded- the amount of a product that the consumers wish to purchase. • Demand schedule- a table which shows the quantities of a good, a consumer is willing and able to buy at alternate prices, in a given time period. • • • • • Individual demand schedulePrice 0.5 1 1.5 2 2.5 3 Quantity (consumer A) 6 5 4 3 2 1 • Market demand schedule- a table that shows the quantity of commodities that would be demanded by all consumers at given prices. Price Quantity (consumer A) 6 5 4 3 2 1 Quantity (consumer B) 10 8 6 4 2 0 Market 0.5 1 1.5 2 2.5 3 16 13 10 7 4 1 • Demand curve- graphical representation of demand schedule. Each point on the demand curve represents a specific quantity that will be demanded at a given price. • Market demand curve- is the horizontal sum of the demand curves of all consumers in the market. D • Law of demand- in a given time period, the quantity demanded of a good increases as its price falls, other things remaining the same(ceteris paribus). • Qd=f(price) • Negative relationship • When price of product rises? • When price of product falls? • Change in quantity demanded- is a movement along the demand curve due to price changes...
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...fall. This is because usage of this type of product will become expensive due to the rising price of related good “oil”. This price increase in oil will cause the demand curve for automobiles to shift leftwards (from D0 to D1) causing equilibrium point to change from E0 to E1. Both quantity and price will thus fall as illustrated by the diagram. (ii) If price of oil increase the quantity demanded for home insulations will increase. This is because this option will be cheaper than using oil to heat houses. This will cause a rightward shift (from D0 to D1) in the demand curve for insulation causing equilibrium point to change from E0 to E1. Both quantity and price will thus increase as illustrated by the diagram. (iii) Coal is a substitute product to oil, and if oil prices increase quantity demanded for coal will increase due. This will cause a rightward shift (from D0 to D1) in the demand curve for insulation causing equilibrium point to change from E0 to E1. Both quantity and price will thus increase as illustrated by the diagram. (iv) Demand for tyres will also be affected by the increase in the oil prices. Because tyres is a complement product for automobiles which function on oil, quantity demanded will fall since even automobiles demand will fall. This will cause the demand curve for tyres to shift leftwards (from D0 to D1) causing equilibrium point to change from E0 to E1. Both quantity and price will thus fall as illustrated by the diagram. (v) Quantity...
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...Microeconomics Chapter 1 1.1 The scarcity principle (also called the no-free-lunch principle). Although we have boundless needs and wants, the resources available to us are limited. Consequently, having more of one good thing usually means having less of another. 1.2 The cost-benefit principle. An individual (or a firm, or a society) should undertake a particular action if, and only if, the extra benefits of undertaking that action are at least as great as the extra costs. 1.3 Economic Surplus is the gain that results from undertaking an action when the benefits outweigh the costs. Simply, it is the difference between the benefit and its cost. Opportunity cost is the value of the next-best alternative to undertaking a particular action. The incentive principle. A person (or firm, or society) is more (less) likely to undertake an action if its benefit (cost) rises, and less (more) likely to undertake it if its cost (benefit) rises. In short, incentive matter, and can be powerful in shaping economic choices. Predicting how people's behaviour will be affected when the incentives they face change is the role of positive economic analysis. In contrast, normative economics is concerned with statements about what actions should or ought to be undertaken. 1.4 A sunk cost is a cost that cannot be recovered at the moment a decision is made. Chapter 2 2.1 The principle of comparative advantage is everyone can do better when each person (or each country) concentrates on the activities for...
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... Market Equilibration Process Paper The following content items are expected to be developed: • The paper/presentation includes specifics about Law of Demand and lists main determinants of demand, Law of Supply and lists main determinants of supply. The basic determinants of demand are (1) consumers’ tastes (preferences)- a change that makes the product more desirable—means that more of it will be demanded at each price. Demand will increase; the demand curve will shift rightward. An unfavorable change in consumer preferences will decrease demand, shifting the demand curve to the left., (2) the number of buyers in the market,- An increase in the number of buyers in a market is likely to increase product demand; a decrease in the number of buyers will probably decrease demand. (3) consumers’ incomes,- For most products, a rise in income causes an increase in demand. (4) the prices of related goods,- A change in the price of a related good may either increase or decrease the demand for a product, depending on whether the related good is a substitute or a complement: and (5) consumer expectations- Changes in consumer expectations may shift demand. A newly formed expectation of higher future prices may cause consumers to buy now in order to “beat” the anticipated price rises, thus increasing current demand. • The paper/presentation explains how equilibrium and disequilibria (surplus and shortage) occur on the market. - The equilibrium price (or marketclearing price...
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...and (c) With a $20 tax in Fig. 2, the buyers' price rises to $70, the sellers' price falls to $50, and the quantity decreases to 3 mobile phones per market period. With the imposition, the sellers' minimum supply-price rises by the amount of the tax and the supply curve shifts to S + Tax. This supply curve does not show marginal social cost. The tax component isn't a social cost of production. It is a transfer of resources to the government. At the new equilibrium quantity, consumer surplus shrinks to the yellow area ($45), and the producer surplus shrinks to the blue area ($45). Part of the loss of total surplus is the government's tax revenue (the pink area) and part becomes a deadweight loss (the grey area). (d) With a tax of $20 per mobile phone, sellers will offer 4 mobile phones per market period only if the price is $80 per mobile phone, so the price paid by buyers rises by $10 to $70 per mobile phone and received by sellers falls by $10 to $50 per mobile phone at the new equilibrium quantity of 3 mobile phones per market period. Consequently, buyers pay $10 of the tax and sellers pay the other $10. The tax is split evenly between sellers and buyers. (e) The average price elasticity of demand for mobile phones between the before tax and after tax equilibrium is 1.86 which is come from the...
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...assignment is late 10 % will be deducted up to a maximum of 3 days. After that assignments will not be accepted. Aim of the subject The aim of this subject is to expose students to some of the key principles of economics theory and their applicability to economic and social problems. At the end of the course, candidates should have attained an understanding of microeconomics and in particular the problems of resource allocation. 1. Introduction Definition of Economics Microeconomics vs. Macroeconomics Positive vs. normative economics Economics as a science Scarcity and wants Opportunity cost. Production Possibility Frontiers Factors of Production 2. Demand, Utility and Supply Demand - price and income Distinction between a movement along and a shift of the demand curve Elasticity of demand Inferior and griffen goods Supply price and cost of production Elasticity of supply Determinants of supply 3. Price Mechanism and Allocation of Resources. Interrelationship between demand and supply Equilibrium price and output Interrelationship between markets Compliments and substitutes Government intervention in the market - Maximum price, minimum price Tax and subsidies 4. Consumer Choice Utility Consumer Equilibrium Marginal utility theory Consumer surplus Indifference Curves 5....
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...the study of what constitutes rational human behavior in the endeavor to fulfill needs and wants. As an individual, for example, you face the problem of having only limited resources with which to fulfill your wants and needs, so, with your money, you must make certain choices. You'll probably spend part of your money on rent, electricity, and food. Then you might use the rest to go to the movies and/or buy a new pair of jeans. Economists, interested in the choices you make, inquire into why, for instance, you might chose to spend your money on a new DVD player instead of a replacing your old TV. They would want to know whether you would still buy a carton of cigarettes if prices increased by $2 per pack. The underlying essence of economics is trying to understand how both individuals and nations behave in response to certain material constraints. We can say then that economics, often referred to as the “dismal science,” is a study of certain aspects of society. Adam Smith (1723 - 1790), the “father of modern economics” and author of the famous book An Inquiry into the Nature and Causes of the Wealth of Nations, spawned the discipline of economics by trying to understand why some nations prospered while others lagged behind in poverty. Others after him also explored how a nation's allocation of resources affects its wealth. To study these things, economics makes the assumption that human beings will aim to fulfill their self-interests. It also assumes that individuals are rational...
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...other variables constant, causes a. a shift to a different demand schedule with higher quantities demanded b. a shift to a different demand schedule with lower quantities demanded c. a movement along a given demand curve to a lower quantity demanded d. a movement along a given demand curve to a higher quantity demanded e. no movement along a given demand curve unless supply also changes Answer: d. A movement along a given demand curve to a higher quantity demanded Explanation: According to law of demand as the price of good decreases the demand will increase. P P= Price of Good P1 Q= Quantity Demanded P2 Q Q1 Q2 As Price decrease from P1 to P2 Quantity Increases from Q1 to Q2 2) If automobiles are a normal good and the price of automobiles rises, then holding all else constant, the a. demand for automobiles will rise b. quantity demanded of automobiles will fall c. demand for automobiles will fall d. quantity demanded of automobiles will rise e. supply of automobiles will fall Answer: b. quantity demanded of automobiles will fall Explanation: Normal goods are those whose demand increases with increase in income. Now since it is given that the cost of the good rises and all other things remain constant implying that the income is also constant that means the demand will fall as consumer will have less money to...
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