The demand curve shows the amount of goods consumers are willing to buy at each market price. An individual demand curve shows the quantity of the good, a consumer would buy at different prices. Plotting price and quantity supply Market equilibrium More demand curves Related Factors affecting demand Demand …
The demand curve shows the amount of goods consumers are willing to buy at each market price. A linear demand curve can be plotted using the following equation. Qd = a – b(P) Q = quantity demand a = all factors affecting QD other than price (e.g. income, fashion) b = slope of the demand …
The Laffer Curve states that if tax rates are increased above a certain level, then tax revenues can actually fall because higher tax rates discourage people from working. Equally, the Laffer Curve states that cutting taxes could, in theory, lead to higher tax revenues. It starts from the premise that if tax rates are 0% …
The essential element of Keynesian economics is the idea the macroeconomy can be in disequilibrium (recession) for a considerable time. To help recover from a recession, Keynesian economics advocates higher government spending (financed by government borrowing) to kickstart an economy in a slump. Keynesian economics includes Disequilibrium in macroeconomy (insufficient demand) Imperfect labour markets (e.g. …
An adverse supply-side shock is an event that causes an unexpected increase in costs or disruption to production. This will cause the short-run aggregate supply curve to shift to the left, leading to higher inflation and lower output. Diagram showing supply-side shock SRAS shifting to the left causes a higher price level and lower real …
Keynesian economics developed in the 1930s offering a response to the unique challenges of the Great Depression. Keynesian economics involves: Government intervention to stabilise the economic cycle e.g. expansionary fiscal policy – cutting tax and increasing spending. The argument is that governments can speed up economic recovery. Criticisms of Keynesian Economics Borrowing causes higher interest …
Elasticity is an important concept in economics. It is used to measure how responsive demand (or supply) is in response to changes in another variable (such as price). Price Elasticity of Demand The most common elasticity is price elasticity of demand. This measures how demand changes in response to a change in price. See: Price …