Chapter 3 Notes - Chapter 3 Notes -Law of demand: Holding...

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Chapter 3 Notes -Law of demand: Holding other things constant, the quantity of demanded any good or activity varies inversely with its price -Inflation: Increase in the general price level of goods -Deflation: Decrease in the general price level of goods -Measure of inflation: Percent change in the cost of purchasing the same bundle of goods from one year to the next -Consumer Price Index (CPI): an index of the cost of purchasing the average bundle of goods, reported by the Bureau of Labor Statistics, ratio example 107.6 = 7.6% -Absolute Price: Change in the general price level measured by the CPI -Relative Price: Change in one price relative to another -Actual (Current) Price: Price that consumers actually faced in that current year, what a gallon of gasoline would cost in 2007 $ -Inflation occurs only because of increases in the amount of money in circulation relative to the goods available (Up to the government and not created/controlled by private sector) -Elasticity of Demand, e: Changes in price and quantity demanded as percentage changes
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This note was uploaded on 05/04/2008 for the course ECON 200 taught by Professor Ta during the Fall '07 term at University of Washington.

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Chapter 3 Notes - Chapter 3 Notes -Law of demand: Holding...

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