econ101fall11lecture7

econ101fall11lecture7 - Aggregate Demand & Aggregate Supply...

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Aggregate Demand & Aggregate Supply Analysis Continued Required Readings • Chapter 8, pp. 155-159 • Chapter 9, pp. 174-176 & 185 • Chapter 10, pp. 193-199

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Aggregate Supply Curve --Preliminaries-- • Business firms produce output of goods and services Firms thus “Supply” output to the economy Output includes both Goods and Services US economy is increasingly a Service-Oriented economy—Now, approx 64% of the economy
• Profit Maximization Define Profits = Sales– Costs Assume firms’ main goal is to maximize profits Not the only goal, but main one

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Aggregate Supply Curve Supply of Output-- Depends on: Average Price Level-- Nominal Wage Rate-- Prices of Other Factors of Production-- Y P W Z s Energy Prices Raw Material Prices Plant & Equipment Prices State of Technology-- T E Capital Sto K ck--
Aggregate Supply Curve Mathematical Statement Determines Determines Position Slope of of : ( , , , , ) s AS AS AS Y S P W Z TE K   

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Graph of Aggregate Supply Curve Can plot against for given , , , Set , , , & :( , , , , ) AS describes how much output firms want to supply at each price level, given W , , , & S oo o o So o o o o o YP W Z T E K W W Z Z TE TE K K AS Y S P W Z TE K ZT E K 
Slope of Aggregate Supply Curve Given W , Z , TE & K , Profits oo o o S P Y   

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Slope of Aggregate Supply Curve Given W , Z , TE & K , Profits oo o o S P Y   
The Position of the Aggregate Supply Curve An Important Cost of Production

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This note was uploaded on 01/12/2012 for the course ECON AS.180.101 taught by Professor Maccini during the Fall '08 term at Johns Hopkins.

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econ101fall11lecture7 - Aggregate Demand & Aggregate Supply...

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