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EXCESS CAPACITY: A condition that exists when monopolistic competition achieves long-run equilibrium such that production by each firm is less than minimum efficient scale. The implication of this condition is that each firm is not producing up to its fullest capacity, as would be the case under perfect competition, and thus more firms are need to produce total market output compared to perfect competition. Excess capacity results because market control means a monopolistically competitive firm faces a negatively-sloped demand curve. Long-run equilibrium is thus achieved by the tangency of the negatively-sloped demand curve and the long-run average cost curve, which results in economies to scale.
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INDUCED CONSUMPTION Household consumption expenditures that depend on income or production (especially disposable income, national income, or even gross domestic product). That is, changes in income induce changes in consumption. Induced consumption captures the fundamental psychological law put forth by John Maynard Keynes. It is measured by the marginal propensity to consume (MPC) and is reflected by the positive slope of consumption line. The alternative to induced consumption is autonomous consumption, which does not depend on income.
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WHITE GULLIBON
[What's This?]
Today, you are likely to spend a great deal of time looking for the new strip mall out on the highway trying to buy either a 50-foot blue garden hose or a turbo-powered vacuum cleaner. Be on the lookout for infected paper cuts.
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A half gallon milk jug holds about $50 in pennies.
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"If I have ever made any valuable discoveries, it has been owing more to patient attention than to any other talent. " -- Isaac Newton, mathematician, physicist
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AEC
Annual Equivalent Costs
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