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DEMAND ELASTICITY AND TOTAL EXPENDITURE: The notion that price-induced changes in total expenditure for a good (price times quantity) depends on the relative price elasticity of demand. In particular, for relatively elastic demand (1 < E < ∞) changes in price cause total expenditure to change in the opposite direction. An increase in price causes total expenditure to fall and a decrease in price causes total expenditure to rise. For relatively inelastic demand (0 < E < 1) changes in price cause total expenditure to change in the same direction. An increase in price causes total expenditure to rise and a decrease in price causes total expenditure to fall. For unit elastic demand (E =1) price changes do not cause any change in total expenditure. Total expenditure is the same whether price increases or decreases.
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CHANGE IN AGGREGATE SUPPLY A shift of the short-run or long-run aggregate supply curve caused by a change in one of the aggregate supply determinants. In essence, a change in aggregate supply is caused by any factor affecting supply EXCEPT the price level. This is one of two changes related to aggregate supply. The other is a change in real production. A change in aggregate supply is comparable to a change in market supply.
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BEIGE MUNDORTLE
[What's This?]
Today, you are likely to spend a great deal of time strolling through a department store hoping to buy either arch supports for your shoes or an AC adapter that works with your MPG player. Be on the lookout for fairy dust that tastes like salt.
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This isn't me! What am I?
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Al Capone's business card said he was a used furniture dealer.
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"After climbing a great hill, one finds many more hills to climb. " -- Nelson Mandela, president of South Africa
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NEDC
National Economic Development Council
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