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WANTS AND NEEDS: These are the unfulfilled desires that motivate human behavior and that when satisfied improve human well-being. They include both physiological or biological requirements for maintaining life (needs) and the psychological desires which make life more enjoyable (wants). However, when push comes to shove, and the nitty gets down to the gritty, it matters very little to markets if people need goods or want goods, so long as they are motivated to buy the goods to satisfy wants and needs.

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Lesson 16: Aggregate Shocks | Unit 5: Synthesis Page: 20 of 21

Topic: Business Cycles <=PAGE BACK | PAGE NEXT=>

To illustrate a business cycle, let's begin with long-run, full-employment equilibrium.
  • With an expansion, consumers have accumulated durable goods.
  • This decreases consumption spending and aggregate demand. The AD curve shifts leftward. We have a recession.
  • Before the SRAS curve automatically shifts to restore full employment, people start buying durable goods again and the AD curve shifts rightward. We have a recovery.
  • The AD curve doesn't stop at full employment. With our expansion we have (possibly) inflation.
  • But accumulation of durable goods causes a decrease in aggregate demand again and another recession.
  • The process continues.

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ELASTIC

The general relation between two variables in which relatively small changes in one variable (A) cause relatively large changes in another variable (B). Small changes in variable A cause relatively large changes in variable B or the percentage change in variable B is larger than the percentage change in variable A. This characterization of elasticity is most important for the price elasticity of demand and the price elasticity of supply. Elastic is one of two general elasticity relations between two variables. The other is inelastic.

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Today, you are likely to spend a great deal of time at a garage sale seeking to buy either a coffee cup commemorating the 2000 Olympics or a birthday gift for your grandmother. Be on the lookout for bottles of barbeque sauce that act TOO innocent.
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A scripophilist is one who collects rare stock and bond certificates, usually from extinct companies.
"Now is the only time there is. Make your now wow, your minutes miracles, and your days pay. Your life will have been magnificently lived and invested, and when you die you will have made a difference."

-- Mark Victor Hansen

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