The original Phillips curve suggested there was a trade-off between nominal wages and unemployment. Higher demand led to rising wages and a fall in unemployment. Lower aggregate demand (AD) led to a fall in nominal wages, but a rise in unemployment. This was adapted to suggest a trade-off between unemployment and inflation. During the 1950s …
Compensated demand curve A compensated demand curve ignores the income effect of a price change. It only measures the substitution effect. A compensated demand curve is therefore less elastic than an ordinary demand curve. An ordinary demand curve shows the effect of price on quantity demanded. A change in price causes a substitution effect, but …
The market supply curve shows the combined quantity supplied of goods at different prices. The market supply curve is the horizontal sum of all individual supply curves. Linear Supply curve A linear supply curve can be plotted using a simple equation P = a + bS a = plots the starting point of the supply …
Readers Question Discuss the view that the Phillips Curve is irrelevant in explaining the relationships between unemployment and inflation in the UK. The standard Phillips curve suggests there is a trade-off between unemployment and inflation. This relationship occurs because of the Keynesian view of the AD/AS diagrams. Diagram showing an increase in AD As AD …
A look at the effect of tariffs on consumers, government tax revenue, domestic firms and net economic welfare.
It’s been a good few decades for the top 1%, with big rises in income and wealth. But, what does it take to be in the top 1% by income, wealth, land-ownership and house values? If we look at the metric of wealth, a Swiss would need $8.5m, an American would need $5.8 million and …
Definitions of Unemployment Unemployment Rate. This is the % of people in the labour force without a job but registered as being willing and available for work Labour Force Those people holding a job or registered as willing and able to work Therefore this is the number employed plus number unemployed (but actively seeking work) …
In the past few years, the UK has seen a rise in the tax burden, but at the same, the UK has seen a reduction in the average rate of economic growth. Is low growth leading to a higher tax burden or is it the high tax burden which is itself contributing to sluggish growth? …