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LABOR-LEISURE TRADEOFF: The perpetual tradeoff faced by human beings between the amount of time spent engaged in wage-paying productive work and satisfaction-generating leisure activities. The key to this tradeoff is a comparison between the wage received from working and the amount of satisfaction generated from leisure. Such a comparison generally means that a higher wage entices people to spend more time working, which entails a positively sloped labor supply curve. However, the backward-bending labor supply curve results when a higher wage actually entices people to work less and to "consume" more leisure time.

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Lesson 5: Demand | Unit 2: Law of Demand Page: 5 of 20

Topic: Definition <=PAGE BACK | PAGE NEXT=>

The law of demand is the basic principle underlying demand, one of our most important economic laws.

A definition:

The law of demand is an inverse relationship between demand price and the quantity demanded, ceteris paribus.

  • Inverse relationship means that people buy more of a good if the price is lower and less if the price is higher.
  • In terms of scientific method, price causes quantity demanded. A change in the price causes a change in the quantity demanded.
Ceteris paribus is important to the law of demand.
  • Ceteris paribus means other things remain unchanged.
  • Law of demand applies exclusively to the relationship between demand price and quantity demanded.
  • All other things that can affect demand must remain constant to avoid distorting this relationship.
  • Because demand is affected by many factors other than price, a buyer may buy larger amounts of a good even with a higher price.
  • Other factors that affect demand are called demand determinants.

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PRODUCT INNOVATION

An innovation of a new product, technology, or idea that generates a beneficial improvement in society and the economy; one that is fundamentally different from existing products, technologies, or ideas. The contrast is with a process innovation, which is an improvement in an existing product, technology, or idea.

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BROWN PRAGMATOX
[What's This?]

Today, you are likely to spend a great deal of time looking for the new strip mall out on the highway seeking to buy either a T-shirt commemorating next Thursday or a birthday gift for your uncle. Be on the lookout for letters from the Internal Revenue Service.
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This isn't me! What am I?

Al Capone's business card said he was a used furniture dealer.
"When you play, play hard; when you work, don't play at all. "

-- Theodore Roosevelt, 26th US president

T-BOND
Treasury Bond
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