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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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INTEREST RATES, AGGREGATE DEMAND DETERMINANT One of several specific aggregate demand determinants assumed constant when the aggregate demand curve is constructed, and that shifts the aggregate demand curve when it changes. An increase in interest rates cause a decrease (leftward shift) of the aggregate curve. A decrease in interest rates an increase (rightward shift) of the aggregate curve. Other notable aggregate demand determinants include the federal deficit, inflationary expectations, and the money supply.
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PURPLE SMARPHIN
[What's This?]
Today, you are likely to spend a great deal of time at a garage sale hoping to buy either a T-shirt commemorating Thor Heyerdahl's Pacific crossing aboard the Kon-Tiki or a wall poster commemorating the 2000 Olympics. Be on the lookout for mail order catalogs with hidden messages.
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This isn't me! What am I?
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Before 1933, the U.S. dime was legal as payment only in transactions of $10 or less.
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"Nothing so conclusively proves a man's ability to lead others as what he does from day to day to lead himself." -- Thomas J. Watson, IBM founder
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JEMS
Journal of Economics and Management Strategy
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