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SELF-CORRECTION, INFLATIONARY GAP: The automatic process through which the aggregate market achieves long-run equilibrium by eliminating an inflationary gap created by short-run equilibrium. With an inflationary gap short-run equilibrium real production is greater than full-employment real production, meaning resource markets have shortages, and in particular labor is overemployed. Self-correction is the process in which these temporary imbalances are eliminated through flexible prices as the aggregate market achieves long-run equilibrium. The key to this process is shifts of the short-run aggregate supply curve caused by changes in wages and other resource prices. The long-run result is lower wages and a decrease in short-run aggregate supply.
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LONG-RUN INDUSTRY SUPPLY CURVE: The relation between market price and the quantity supplied by all firms in a perfectly competitive industry after the industry as completed its long-run adjustment. The long-run industry supply curve effectively traces out a series of equilibrium prices and quantities the reflect long-run adjustments of a perfectly competitive industry to demand shocks. This long-run adjustment can take one of three paths: increasing, decreasing, and constant. These three adjustment paths indicate an increasing-cost industry, decreasing-cost industry, and constant-cost industry, respectively. See also | price | quantity supplied | firm | perfect competition | industry | long-run adjustment, perfect competition | demand shock | increasing-cost industry | decreasing-cost industry | constant-cost industry |
Recommended Citation:LONG-RUN INDUSTRY SUPPLY CURVE, AmosWEB GLOSS*arama, http://www.AmosWEB.com, AmosWEB LLC, 2000-2021. [Accessed: April 13, 2021].
AmosWEB Encyclonomic WEB*pedia:Additional information on this term can be found at: WEB*pedia: long-run industry supply curve
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KINKED-DEMAND CURVE A demand curve with two distinct segments which have different elasticities that join to form a corner or kink. The primary use of the kinked-demand curve is to explain price rigidity in oligopoly. The two segments are: (1) a relatively more elastic segment for price increases and (2) a relatively less elastic segment for price decreases. The relative elasticities of these two segments is based on the interdependent decision-making of oligopolistic firms.
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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 a how-to book on home repairs or a large, stuffed kitty cat. Be on the lookout for poorly written technical manuals.
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Okun's Law posits that the unemployment rate increases by 1% for every 2% gap between real GDP and full-employment real GDP.
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"Education is the ability to listen to almost anything without losing your temper or your self-confidence. " -- Robert Frost
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