Macroeconomics Notes 2-28-08

Macroeconomics Notes 2-28-08 - Macroeconomics Notes 2/28/08...

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Macroeconomics Notes 2/28/08 - Market equilibrium o One force representing demand, one force representing supply - Disturbances and the market adjustment to these disturbances o Example 1: bird flu wipes out half the nation’s stock Short-term Chicken prices will go up Chicken breeders will go out of business Long-term Development of vaccine to cure bird flu o Takes two years to develop and is very effective o Will cause more chicken breeders to enter the market, causing supply to increase and prices to drop o This is an example of the self-correcting mechanics of the market However, it may take years o Example 2: OPEC decides to have an oil embargo and not sell to the US Short-term effects Huge decrease in supply of oil and increase in gasoline prices ($20 a gallon) People will start conserving gasoline and demand will drop Long-term effects If oil remains at $20 a gallon, auto manufacturers will start making fuel-efficient cars o Takes three years to develop hydrogen, electric, hybrid, etc. Demand for oil will drop further
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This note was uploaded on 04/12/2008 for the course ECON 100 taught by Professor Park during the Spring '07 term at American.

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Macroeconomics Notes 2-28-08 - Macroeconomics Notes 2/28/08...

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