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HOTELLING'S RULE: The notion that efficiency and competitive market forces will lead to an increase of scarcity rent of a finite, exhaustible resource that is equal to the interest rate. The logic behind Hotelling's Rule is that as a finite fossil fuel is depleted, less is available in the future, causing scarcity rent, and thus the resource price, to increase. An increase in the resource price reduces the quantity demanded and conserves more for future consumption. When finite, exhaustible resource markets are competitive, this process generates an efficient allocation over time.
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Lesson 16: Aggregate Shocks | Unit 4: Complex Shifts
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Page: 13 of 21
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Our analysis of AD-curve-induced aggregate market adjustment from one equilibrium to another is more complex when we include the self-correction mechanism from the short run to the long run. Two cases: - Aggregate demand increases.
- Aggregate demand decreases.
The complex adjustment is a two step process: - First: The AD curve shifts, which leads to a short-run equilibrium and moves the aggregate market away from the long-run equilibrium.
- Second: Wages adjust to achieve equilibrium in the labor market--eventually--which changes production costs, shifts the SRAS, and restores long-run 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 [What's This?]
Today, you are likely to spend a great deal of time going from convenience store to convenience store trying to buy either a genuine down-filled snow parka or throw pillows for your living room sofa. Be on the lookout for infected paper cuts. Your Complete Scope
This isn't me! What am I?
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A U.S. dime has 118 groves around its edge, one fewer than a U.S. quarter.
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"The mediocre teacher tells. The good teacher explains. The superior teacher demonstrates. The great teacher inspires." -- William Ward ‚ Texas Wesleyan University Administrator
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BOP Balance of Payments
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