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October 19, 2021 

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VOLUNTARY EXCHANGE: The process of willingly trading one item for another. The emphasis here is on "willingly." Voluntary exchanges are the heart and soul of market transactions, and should be contrasted with the "involuntary" exchanges mandated by government taxes, laws, and regulations. While involuntary government-forced exchanges play an important role in a mixed economy, economists really, really like voluntary market exchanges because they promote economic efficiency.

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Lesson Contents
Unit 1: The Concept
  • What It Is
  • Price Level
  • Unit 1 Summary
  • Unit 2: Two Options
  • Time Periods
  • Long Run
  • Short Run
  • Unit 2 Summary
  • Unit 3: The Curves
  • Long Run
  • Short Run
  • Market Supply
  • Unit 3 Summary
  • Unit 4: Determinants
  • Stability
  • Long-Run Supply
  • Quantity of Resources
  • Quality of Resources
  • Short-Run Supply
  • Unit 4 Summary
  • Unit 5: Connections
  • Self Correction
  • Policies
  • Unit 5 Summary
  • Course Home
    Aggregate Supply

    In much the same way that the market supply lesson parallels the market demand lesson, this lesson on aggregate supply parallels the aggregate demand lesson. Aggregate supply however, is somewhat more involved that market supply, in particular, because aggregate supply is separated into two relations -- on for the short run and one for the long run. This lesson examines the relation between the price level and real production and the determinants that cause a change in aggregate supply, with a close eye on the differences between aggregate supply in the short run and the long run.

    • This lesson begins with an introduction to the aggregate supply half of the aggregate market in the first unit.
    • The second unit then explores the different aggregate supply relations that exist between the price level and real production in the short run and the long run.
    • The third unit introduces the short run aggregate supply curve and the long run aggregate supply curve which capture these two alternative relations.
    • We think pick up the keep curve shifting determinants of aggregate supply in the fourth unit, especially the resource quantity, resource quality, and resource prices.
    • The fifth unit wraps up this lesson with a discussion of the self-correction mechanism that relies on changes in the aggregate supply and how this relates to business cycle stabilization.

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    PLANNING HORIZON

    Another term for the long-run average cost curve. The long-run average cost curve is termed the planning horizon or planning curve because it provides information that a firm can use to plan factory construction and expansion in the long run.

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    PURPLE SMARPHIN
    [What's This?]

    Today, you are likely to spend a great deal of time watching the shopping channel wanting to buy either an AC adapter that works with your MPG player or rechargeable batteries. Be on the lookout for attractive cable television service repair people.
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    This isn't me! What am I?

    Paper money used by the Commonwealth of Massachusetts prior to the U.S. Revolutionary War, which was issued against the dictates of Britain, was designed by patriot and silversmith, Paul Revere.
    "Think not of yourself as the architect of your career but as the sculptor. Expect to have to do a lot of hard hammering and chiseling and scraping and polishing. "

    -- B. C. Forbes, founder, Forbes magazine

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