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HEDGING: Buying or selling futures contracts to protect against price changes. This is a common form of "insurance" used by those who produce various commodities, such as wheat, cattle, coffee, and natural gas, as well as those who buy these commodities as inputs.
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Lesson 8: Market Shocks | Unit 1: Adjustments
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In this lesson we use the market as a tool to understand our economic world, specifically, we see how markets move from one equilibrium to another. One goal of this lesson: - Use the market model to examine the why and how of market shocks, adjustments to a new equilibrium.
Why do we do this?- Markets in the real world do not remain at the same equilibrium forever. Markets move. Prices and quantities change.
To understand real world changes, we need to analyze what happens to the market when a shock disrupt it.
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ELASTICITY The relative response of one variable to changes in another variable. Elasticity is commonly used in the study of market exchanges to identify the relative response of quantity (demanded and supplied) to changes in price. The phrase "relative response" is best interpreted as the percentage change, such as, the percentage change in quantity measured against the percentage change in price. The most common notions of elasticity are the price elasticity of demand and the price elasticity of supply. Other notable economic elasticities are the income elasticity of demand and the cross elasticity of demand.
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WHITE GULLIBON
[What's This?]
Today, you are likely to spend a great deal of time touring the new suburban shopping complex looking to buy either 500 feet of telephone cable or a package of 4 by 6 index cards, the ones with lines. Be on the lookout for slow moving vehicles with darkened windows.
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The Dow Jones family of stock market price indexes began with a simple average of 11 stock prices in 1884.
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"We succeed in enterprises (that) demand the positive qualities we possess, but we excel in those (that) can also make use of our defects." -- Alexis de Tocqueville, Statesman
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OTS
Office of Thrift Supervision
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