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AE LINE: Another term for aggregate expenditure line, which is a line representing the relation between aggregate expenditures and gross domestic product used in the Keynesian cross. The aggregate expenditure line is obtained by adding investment expenditures, government purchases, and net exports to the consumption line. As such, the slope of the aggregate expenditure line is largely based on the slope of the consumption line (which is the marginal propensity to consume), with adjustments coming from the marginal propensity to invest, the marginal propensity for government purchases, and the marginal propensity to import. The intersection of the aggregate expenditures line and the 45-degree line identifies the equilibrium level of output in the Keynesian cross.
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                           ECONOMIC THINKING: A way of looking at and analyzing the way the world works by comparing the cost of an action with the benefit generated. The study of economics is the process of economic thinking about issues related to the scarcity problem. The need for economic thinking is a direct result of the scarcity problem, which exists due to unlimited wants and needs, but limited resources. Scarcity means that virtually all actions incur an opportunity cost. Identifying the cost of an action, no matter how hidden or subtle it may be, is the essence of economic thinking.Cost and BenefitSuppose, for example, that Alicia Hyfield, an average everyday run-of-the-mill college student, is contemplating the purchase of a new computer. Economic thinking suggests that a comparison between the cost of the computer and the benefit derived from using it are in order. The cost includes out of pocket expenses (purchase price, taxes, shipping charges) as well as Alicia's time and effort (driving to the store, setting up the computer, learning the programs). The benefit includes improved grades, a better education, and even the enjoyment of playing video games. Economic thinking poses the question: Does the benefit of the purchase justify the cost? If Alicia makes the purchase, economic thinking implies she has decided that the benefit exceeds the cost. An Economic WorldThe study of economics is essentially the process of economic thinking about assorted economic phenomena, such as production, consumption, market exchanges, and a host of other topics too numerous to list here. However, closer inspection reveals that most aspects of human existence, many that might not seem like economic phenomena, can also be subject to economic thinking.Suppose, for example, that Alicia Hyfield is also contemplating the upcoming Shady Valley Mayoral election. Should she vote for the incumbent Mayor Victor Thurgood or the challenger Roland Nottingham? Economic thinking results when Alicia evaluates the cost and benefit of voting for each candidate. - Mayor Thurgood has proposed constructing a new park with a jogging track. Alicia likes to jog.
- Roland Nottingham has suggested that a new tax on left-handed people would raised needed revenue. Alicia is left-handed.
- But Mayor Thurgood also wants to reduce environmental regulations. Alicia has asthma and suffers when air pollution is high.
- Then again Roland Nottingham is a strong advocate of education and an alumnus of the Ambling Institute of Technology. Alicia is a student at the Ambling Institute of Technology.
Voting, crime, marriage, studying, and a number of other human activities, can also be subject to economic theory. What is the anticipated cost and benefit of robbing a convenience store? What is the anticipated cost and benefit of proposing marriage? What is the anticipated cost and benefit of preparing for an upcoming exam?Virtually every decision made by a human being results in cost and benefit, and is thus subject to economic thinking. In fact, most people engage in such economic thinking even without formal economic training.
Recommended Citation:ECONOMIC THINKING, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: June 30, 2025].
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YELLOW CHIPPEROON
[What's This?]
Today, you are likely to spend a great deal of time flipping through mail order catalogs looking to buy either income tax software or a how-to book on the art of negotiation. Be on the lookout for fairy dust that tastes like salt.
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In the Middle Ages, pepper was used for bartering, and it was often more valuable and stable in value than gold.
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"I learned about the strength you can get from a close family life. I learned to keep going, even in bad times. I learned not to despair, even when my world was falling apart. I learned that there are no free lunches. And I learned the value of hard work. " -- Lee Iacocca
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AVC
Average Variable Cost
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