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SAVING: The after-tax disposable income of the household sector that is not used for consumption expenditures. In general terms, saving is the use of income to purchase legal claims through financial markets rather than the direct purchase of physical goods and services. In the macroeconomic world modeled by the circular flow, saving is the diversion of household income away from consumption and into the financial markets. In this model, saving is a primary source of funds used for business investment expenditures for capital goods. Saving is also used to finance government expenditures.
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Lesson 4: Production Possibilities | Unit 1: Getting Started
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Page: 2 of 24
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Every economic analysis builds on certain preconditions or assumptions. Assumptions, whether reasonable or seemingly unrealistic, let us:- Establish abstract benchmarks for comparison or
- Break an analysis into simpler, more easily manageable parts.
Four key assumptions: - Two Goods: Resources are used to produce one or both of only two goods. This is a simplifying assumption that lets us display graphs on the screen.
- Fixed Resources: The quantities of the labor, capital, land, and entrepreneurship resources do not change. This is a reasonable assumption that we can change to analysis resource changes.
- Fixed Technology: The information and knowledge that society has about the production of goods and services is fixed. This is another reasonable assumption that we can change to analysis technology changes.
- Technical Efficiency: Resources are used in a technically efficient way. We get the maximum possible production out of the resource inputs.
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LAW OF DIMINISHING MARGINAL UTILITY A principle stating that as the quantity of a good consumed increases, eventually each additional unit of the good provides less additional utility--that is, marginal utility decreases. Each subsequent unit of a good is valued less than the previous one. The law of diminishing marginal utility helps to explain the negative slope of the demand curve and the law of demand.
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PINK FADFLY
[What's This?]
Today, you are likely to spend a great deal of time lost in your local discount super center wanting to buy either galvanized steel storage shelves or a large green chalkboard shaped like the state of Maine. Be on the lookout for fairy dust that tastes like salt.
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This isn't me! What am I?
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In the early 1900s around 300 automobile companies operated in the United States.
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"Far and away the best prize that life has to offer is the chance to work hard at work worth doing." -- Theodore Roosevelt, 26th US president
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OTC
Over the Counter
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