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DEMAND SPACE: The area on or beneath a demand curve. Buyers are willing and able to purchase any demand price-quantity demanded combination that places them on or below the demand curve, but not above. The reason is that the demand curve represents the maximum demand price for a given quantity demanded or the maximum quantity demanded for a given demand price.
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Lesson 14: Aggregate Supply | Unit 3: The Curves
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Page: 8 of 20
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The long-run aggregate supply (LRAS) curve captures the relationship between the price level and the aggregate supply of real production in the long run.- GDP deflator, the price level, is measured on the vertical axis. Real GDP, the real production, is measured on the horizontal axis.
Highlights:- The LRAS is a straight, vertical line.
- The price level does not affect the aggregate supply of real production.
- The supply is real production given that all resources are fully employed.
- Flexible prices ensures that full employment production is maintained, in the long run.
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UNEMPLOYMENT RATE, MEASUREMENT PROBLEMS The official unemployment rate, which measures the proportion of the civilian labor force 16 years or older that is not engaged in productive activities but is actively seeking employment, might be either overstated or understated due to discouraged workers, part-time workers, and unreported legal or illegal employment. Taken together, these measurement problems suggest that the official unemployment rate is likely understated during business-cycle contraction and overstated during business-cycle expansions.
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PURPLE SMARPHIN
[What's This?]
Today, you are likely to spend a great deal of time flipping through the yellow pages trying to buy either a velvet painting of Elvis Presley or a wall poster commemorating yesterday. Be on the lookout for vindictive digital clocks with revenge on their minds.
Your Complete Scope
This isn't me! What am I?
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A lump of pure gold the size of a matchbox can be flattened into a sheet the size of a tennis court!
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"The past is a foreign country; they do things differently there." -- Leslie Poles Hartley, Writer
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WPO
Weakly Pareto Optimal
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