Econ Txtbook Outline - CH4SupplyandDemand 19:30 Demand...

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CH 4 Supply and Demand 19:30 Demand: Willingness and ability to pay The Law of Demand: Quantity demanded rises as price falls, other things constant Quantity demanded falls as price rises. The Demand Curve: The graphical representation of the relationship between price and quantity demanded.  The demand curve slopes downward: as the price goes up, demand goes down, and  other things constant(places a limitation on the application of the law of demand). Price  and quantity are inversely related. “other things constant”= tastes, prices of other goods, weather Shifts in Demand v. Movements along a Demand Curve Demand:  refers to a schedule of quantities of a good that will be bought per unit of time  at various prices, other things constant. Quantity Demanded:  refers to a specific amount that will be demanded per unit at a  specific price, other things constant.  Movement along a demand curve:  the graphical representation of the effect of a  change in price in the quantity demanded. Shift in demand:  the graphical representation of the effect of anything other than price  on demand. Change in price causes a movement along a demand curve; a change in shift factor causes a shift in demand. Shift Factors of Demand: 1.  Society’s income 2.  Prices of other goods 3.  Tastes 4.  Expectations 5.  Taxes and subsidies.
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Chapter 6: Economic Growth, Business Cycles, and  Structural Stagnation  1.  Macroeconomics=  is the study of problems that affect the economy as a whole (lack of growth, recessions, unemployment, and inflation) and what to do about them.  I. THE HISTORICAL DEVELOPMENT OF MACRO The 1930s marks the beginning of macro’s focus on the demand side of the economy.  During the Great Depression, unemployment rose to 25% and output fell to about 30%. From Classical to Keynesian Economics: Classical Economists     Before the Great Depression, these economists focused on the  problem of growth; keeping the economy growing over time. They avoided short run  prospects of the economy (unemployment, economic ups and downs) Keynesian economists:  Economists who focused on short run. Leading economists was John Maynard Keynes, author of “The General Theory of Employment, Interests and  Money”; originator of macroeconomics as a separate discipline from micro. Classical Economics: These are economists who believe that business cycles ( ups and downs of the  economy) are temporary glitches; they favor laissez faire policies; non-activist  policies. They believed the market was self regulating, through the invisible hand  (pricing mechanism of the market)
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