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AGGREGATE DEMAND DETERMINANT: A ceteris paribus factor that affects aggregate demand, but which is 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: 19 of 20

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Advertising is unlikely to be the DIRECT cause of greater sales and production.
  • First link: Advertising increases buyers' preferences.
  • Second link: Buyers' preferences increase market demand and market price.
  • Third link: Higher price induces suppliers to increase production.
Scientific answer:
  • The increase in sales and production are caused by higher prices, which is caused by greater demand, which is caused by a change in buyers' preferences, which is caused by advertising.
  • The goal of the scientific study of economics is to identify these distinct, but interrelated cause-and-effect principles.

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SHORT-RUN PRODUCTION ANALYSIS

An analysis of the production decision made by a firm in the short run, with the ultimate goal of explaining the law of supply and the upward-sloping supply curve. The central feature of this short-run production analysis is the law of diminishing marginal returns, which results in the short run when larger amounts of a variable input, like labor, are added to a fixed input, like capital. A contrasting analysis is long-run production analysis.

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Today, you are likely to spend a great deal of time driving to a factory outlet looking to buy either decorative celebrity figurines or a flower arrangement with anything but tulips for your grandfather. Be on the lookout for malfunctioning pocket calculators.
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On a typical day, the United States Mint produces over $1 million worth of dimes.
"You are never given a dream without also being given the power to make it true."

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