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MARGINAL COST: The change in total cost (or total variable cost) resulting from a change in the quantity of output produced by a firm in the short run. Marginal cost indicates how much total cost changes for a give change in the quantity of output. Because changes in total cost are matched by changes in total variable cost in the short run (remember total fixed cost is fixed), marginal cost is the change in either total cost or total variable cost. Marginal cost, usually abbreviated MC, is found by dividing the change in total cost (or total variable cost) by the change in output.

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INDUCED INVESTMENT

Business investment expenditures that depend on income or production (especially national income and gross domestic product). That is, changes in income induce changes in investment. Induced investment reflects the observation that the business sector is inclined to reinvest profits (boosted by a growing economy) in capital goods. It is measured by the marginal propensity to invest (MPI) and is reflected by the positive slope of investment line. The alternative to induced investment is autonomous investment, which does not depend on income.

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