Aggregate demand (AD) is the total demand for goods and services produced within the economy over a period of time. Aggregate demand (AD) is composed of various components. AD = C+I+G+ (X-M) C = Consumer expenditure on goods and services. I = Gross capital investment – i.e. investment spending on capital goods e.g. factories and …
Definition of investment: Investment is the addition to Capital Stock of the economy – e.g. factories, machines, or any item that is used to produce other goods and services Note saving money in a bank is not investment in economic terminology The value of capital stock depreciates over time as it wears out and is …
Readers Question. I came across a company recently which farms mussels of the coast of a small town in Bulgaria, and I started thinking about its structure in the economy. I know since it produces a homogeneous product along with hundreds of other mussel farmers, it must be in perfect competition, however this mussel company …
“Readers Question – A microeconomics question. In you labour market section you discuss a monopsonist.You say that “in order to employ one extra worker the firm has to increase the wages of all workers”- why? You give a coal mine as a possible example of a monopsonist, do you really think that a coal mine …
Readers Question: How much bargaining power do workers have? Bargaining Power is the ability for firms or workers to get what they want. An example of bargaining power is related to the power of trades unions. If a part-time worker works for a firm with monopsony power, they will have very low bargaining power. However, …
The great moderation refers to a period of economic stability characterised by low inflation, positive economic growth, and the belief that the boom and bust cycle had been overcome. In retrospect, economists look back on the great moderation in a different light because although inflation was low, there was great volatility in financial markets and …
Diagrams showing different types of elasticity – inelastic demand, elastic demand, inelastic supply, elastic supply. The effect of tax Inelastic Demand Elastic demand Elastic Supply Inelastic Supply Effect of elasticity on impact of subsidy Effect of Tax on Elastic Demand Effect of Tax on Inelastic Demand