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AGGREGATE DEMAND DETERMINANTS: An assortment of ceteris paribus factors that affect aggregate demand, but which are assumed constant when the aggregate demand curve is constructed. Changes in any of the aggregate demand determinants cause the aggregate demand curve to shift. While a wide variety of specific ceteris paribus factors can cause the aggregate demand curve to shift, it's usually most convenient to group them into the four, broad expenditure categories -- consumption, investment, government purchases, and net exports. The reason is that changes in these expenditures are the direct cause of shifts in the aggregate demand curve. If any determinant affects aggregate demand it MUST affect one of these four expenditures.

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Lesson 2: Economic Science | Unit 5: Cause and Effect Page: 18 of 20

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  • Suppose we suspect an apparent correlation between jogging shoe sales and advertising expenditures. Does advertising cause greater shoe production and sales.
Series of events:
  1. Shoe companies increase advertising,
  2. Buyers realize that they want or need more shoes,
  3. Buyers buy more jogging shoes,
  4. Stores sell shoes and order more,
  5. Manufactures respond by making more jogging shoes,
  6. Jogging shoe sales and production are greater.

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PERFECT COMPETITION, LONG-RUN EQUILIBRIUM CONDITIONS

The long-run equilibrium of a perfectly competitive industry generates six specific equilibrium conditions, including: (1) economic efficiency (P = MC), (2) profit maximization (MR = MC), (3) perfect competition (MR = AR = P), (4) breakeven output (P = AR = ATC), (5) minimum production cost (MC = ATC), and (6) minimum efficient scale (MC = ATC = LRAC = LRMC).

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BROWN PRAGMATOX
[What's This?]

Today, you are likely to spend a great deal of time strolling through a department store looking to buy either a New York Yankees baseball cap or several magazines on home repairs. Be on the lookout for gnomes hiding in cypress trees.
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This isn't me! What am I?

The first paper currency used in North America was pasteboard playing cards "temporarily" authorized as money by the colonial governor of French Canada, awaiting "real money" from France.
"The roots of education are bitter, but the fruit is sweet."

-- Aristotle, philosopher

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