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EURO ZONE: The geographic area occupied by the member nations of the European Economic and Monetary Union that share the same currency (euro) and monetary policy.

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Lesson 8: Market Shocks | Unit 3: Single Shifts 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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AGGREGATE SUPPLY DECREASE, LONG-RUN AGGREGATE MARKET

A shock to the long-run aggregate market caused by a decrease in aggregate supply, resulting in and illustrated by a leftward shift of the long-run aggregate supply curve. A decrease in aggregate supply in the long-run aggregate market results in an increase in the price level and a decrease in real production. The level of real production resulting from the shock is a smaller level of full-employment real production.

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Today, you are likely to spend a great deal of time browsing through a long list of dot com websites trying to buy either decorative celebrity figurines or a flower arrangement with anything but tulips for your grandfather. Be on the lookout for attractive cable television service repair people.
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In the late 1800s and early 1900s, almost 2 million children were employed as factory workers.
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IGARCH
Integrated Generalized Autoregressive Conditional Heteroskedasticity
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