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KINKED-DEMAND CURVE: A demand curve with two distinct segments with different elasticities that join to form a kink. The primary use of the kinked-demand curve is to explain price rigidity in oligopoly. The two segments are: (1) a relatively more elastic segment for price increases and (2) a relatively less elastic segment for price decreases. The relative elasticities of these two segments is directly based on the interdependent decision-making of oligopolistic firms.
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Lesson 8: Market Shocks | Unit 5: Cause and Effect
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Page: 18 of 20
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Topic:
Economic Science
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Economic analysis lets us examine market shocks in a systematic manner.- Many things affect the market. Prices and quantities can fall or raise for many different reasons.
- Ceteris paribus lets us isolate particular changes in the demand and supply determinants to analyze how price and quantity are affected.
- This market-shock analysis lets us isolate the basic cause and effect principles of economic science.
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AGGREGATE DEMAND INCREASE, LONG-RUN AGGREGATE MARKET A shock to the long-run aggregate market caused by an increase in aggregate demand resulting in and illustrated by a rightward shift of the aggregate demand curve. An increase in aggregate demand in the long-run aggregate market results in an increase in the price level but no change in real production. The level of real production resulting from the aggregate demand shock is full-employment real production.
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The 1909 Lincoln penny was the first U.S. coin with the likeness of a U.S. President.
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"In a time of drastic change, it is the learners who inherit the future. " -- Eric Hoffer, philosopher
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AMEX
American Stock Exchange
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