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SELF-CORRECTION, RECESSIONARY GAP: The automatic process through which the aggregate market achieves long-run equilibrium by eliminating a recessionary gap created by short-run equilibrium. With a recessionary gap short-run equilibrium real production is less than full-employment real production, meaning resource markets have surpluses, and in particular labor is unemployed. Self-correction is the process in which these temporary imbalances are eliminated through flexible prices as the aggregate market achieves long-run equilibrium. The key to this process is shifts of the short-run aggregate supply curve caused by changes in wages and other resource prices. The long-run result is lower wages and an increase in short-run aggregate supply.
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CONSUMER EQUILIBRIUM: The condition that exists when the last dollar spent on one good provides the same marginal utility as the last dollar spent on every other good. In consumer equilibrium, you allocate income between the purchase of different goods in such a way that you cannot increase your level of utility, that is, you have achieved utility maximization. In indifference curve analysis, this occurs where the budget line is tangent to the highest reachable indifference curve. With this consumption bundle, the ratio of prices is equal to the ratio of marginal utilities. This means that the willingness of the consumer to trade one good for the other is exactly the same as the ability to trade the two goods in the market. See also | marginal utility | utility | consumer demand theory | utility maximization | budget line | indifference curve |
Recommended Citation:CONSUMER EQUILIBRIUM, AmosWEB GLOSS*arama, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: May 17, 2024].
AmosWEB Encyclonomic WEB*pedia:Additional information on this term can be found at: WEB*pedia: consumer equilibrium
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MARKET The organized exchange of commodities (goods, services, or resources) between buyers and sellers within a specific geographic area and during a given period of time. Markets are the exchange between buyers who want a good (the demand-side of the market) and the sellers who have it (the supply-side of the market).
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ORANGE REBELOON
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Today, you are likely to spend a great deal of time visiting every yard sale in a 30-mile radius hoping to buy either any book written by Isaac Asimov or a how-to book on building remote controlled airplanes. Be on the lookout for mail order catalogs with hidden messages.
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In the early 1900s around 300 automobile companies operated in the United States.
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