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DEMAND ELASTICITY AND TOTAL EXPENDITURE: The notion that price-induced changes in total expenditure for a good (price times quantity) depends on the relative price elasticity of demand. In particular, for relatively elastic demand (1 < E < ∞) changes in price cause total expenditure to change in the opposite direction. An increase in price causes total expenditure to fall and a decrease in price causes total expenditure to rise. For relatively inelastic demand (0 < E < 1) changes in price cause total expenditure to change in the same direction. An increase in price causes total expenditure to rise and a decrease in price causes total expenditure to fall. For unit elastic demand (E =1) price changes do not cause any change in total expenditure. Total expenditure is the same whether price increases or decreases.
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SIMPLE EXPENDITURES MULTIPLIER A measure of the change in aggregate production caused by changes in an autonomous expenditure that shocks the macroeconomy, when consumption is the ONLY induced expenditure. The simple expenditures multiplier is the inverse of one minus the marginal propensity to consume, or more simply the inverse of the marginal propensity to save. A related multiplier is the simple tax multiplier, which measures the change in aggregate production caused by changes in taxes.
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PURPLE SMARPHIN
[What's This?]
Today, you are likely to spend a great deal of time searching the newspaper want ads trying to buy either a key chain with a built-in flashlight and panic button or a green and yellow striped sweater vest. Be on the lookout for mail order catalogs with hidden messages.
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This isn't me! What am I?
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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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"Always remember that striving and struggle precede success, even in the dictionary. " -- Sarah Ban Breathnach, writer
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PDI
Personal Disposable Income
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