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S-I MODEL: A model used to identify equilibrium in Keynesian economics based on injections (investment, I) and leakages (saving, S) for the two basic sectors (household and business). Equilibrium is achieved at the intersection of the saving line, S, and the investment line, I.

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Lesson 6: Supply | Unit 1: Selling Basics Page: 2 of 19

Topic: Supply Price <=PAGE BACK | PAGE NEXT=>

There's more we need to consider about supply. First the supply price.

Supply price is the minimum price that sellers would be willing and able to accept for a given quantity of a good.

  • Sellers have an lower limit on the price that they would be willing and able to accept for a good, compared to the upper limit of the demand price.
  • Sellers are willing and able to accept a higher price. In fact, they would be glad to sell a good for a billion dollars... or more.
  • The minimum supply price is based on the fact of economic life that people prefer more to less.

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IMPACT LAG

The time lag that occurs between the implementation of a government policy designed to correct an economic problem and the complete impact of the policy. The impact lag is based on the multiplier process and can last up to a year or two or even longer. This "outside lag" is one of four policy lags associated with monetary and fiscal policy. The other three "inside lags" are recognition lag, decision lag, and implementation lag. All four policy lags can reduce the effectiveness of business-cycle stabilization policies and can even destabilize the economy.

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