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ARBITRAGE: Buying something in one market then immediately (or as soon as possible) selling it in another market for (hopefully) a higher price. Arbitrage is a common practice in financial markets. For example, an aspiring financial tycoon might buy a million dollars worth of Japanese yen in the Tokyo foreign exchange market then resell it immediately in the New York foreign exchange market for more than a million dollars. Arbitrage of this sort does two things. First, it often makes arbitragers wealthy. Second, it reduces or eliminates price differences that exist between two markets for the same good.
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Lesson 8: Market Shocks | Unit 3: Single Shifts
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Page: 8 of 20
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An increase in demand caused by one of the demand determinants.- Initial equilibrium market at price Po and quantity Qo
- Buyers acquire a sudden "appetite" for hot fudge sundaes.
A summary: - The demand curve shifts rightward.
- The initial equilibrium is no longer an equilibrium.
- The new equilibrium is at the intersection of the original supply curve with the new demand curve.
- New equilibrium price is P1 and new equilibrium quantity is Q1.
The six steps of market adjustment for an increase in demand:- A determinant changes. We have a greater appetite for hot fudge sundaes.
- A curve to shifts. The demand curve for hot fudge sundaes shifts rightward.
- A shortage or a surplus occurs. The increase in demand causes a shortage of hot fudge sundaes.
- The price changes. The price of hot fudge sundaes goes up.
- The quantities demanded and supplied change. The quantity supplied for hot fudge sundaes increases while their quantity demand is reduced.
- The market imbalance is eliminated and equilibrium is restored. The shortage of hot fudge sundaes is eliminated. The price is higher and the quantity exchanged is more.
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MANAGED FLEXIBLE EXCHANGE RATE An exchange rate control policy in which an exchange rate that is generally allowed to adjust to equilibrium levels through to the interaction of supply and demand in the foreign exchange market, but with occasional intervention by government. Also termed managed float or dirty float, most nations of the world currently use a managed flexible exchange rate policy. With this alternative an exchange rate is free to rise and fall, but it is subject to government control if it moves too high or too low. With managed float, the government steps into the foreign exchange market and buys or sells whatever currency is necessary keep the exchange rate within desired limits. This is one of three basic exchange rate policies used by domestic governments. The other two policies are flexible exchange rate and fixed exchange rate.
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RED AGGRESSERINE
[What's This?]
Today, you are likely to spend a great deal of time calling an endless list of 800 numbers hoping to buy either a three-hole paper punch or decorative picture frames. Be on the lookout for fairy dust that tastes like salt.
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This isn't me! What am I?
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More money is spent on gardening than on any other hobby.
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"Man is born to live, not to prepare for life. " -- Boris Pasternak, writer
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AOQ
Average Outgoing Quality
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