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AMORTIZATION: The process of paying off a debt liability and accrued interest through a series of equal, periodic payments. Car loans and mortgages are two debts commonly paid off through amortization. Your monthly car payment, for example, partially pays for interest accrued on the outstanding balance and partly reduces that balance. Because one payment reduces the outstanding balance, each subsequent payment has a smaller portion for interest. If the proper amortization schedule has been calculated, your loan will be paid off with the last payment.

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Lesson 8: Market Shocks | Unit 3: Single Shifts Page: 8 of 20

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An increase in demand caused by one of the demand determinants.
  • Initial equilibrium market at price Po and quantity Qo
  • Buyers acquire a sudden "appetite" for hot fudge sundaes.
A summary:
  • The demand curve shifts rightward.
  • The initial equilibrium is no longer an equilibrium.
  • The new equilibrium is at the intersection of the original supply curve with the new demand curve.
  • New equilibrium price is P1 and new equilibrium quantity is Q1.
The six steps of market adjustment for an increase in demand:
  • A determinant changes. We have a greater appetite for hot fudge sundaes.
  • A curve to shifts. The demand curve for hot fudge sundaes shifts rightward.
  • A shortage or a surplus occurs. The increase in demand causes a shortage of hot fudge sundaes.
  • The price changes. The price of hot fudge sundaes goes up.
  • The quantities demanded and supplied change. The quantity supplied for hot fudge sundaes increases while their quantity demand is reduced.
  • The market imbalance is eliminated and equilibrium is restored. The shortage of hot fudge sundaes is eliminated. The price is higher and the quantity exchanged is more.

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MIDPOINT ELASTICITY FORMULA

A simple technique for calculating the coefficient of elasticity by estimating the average elasticity for discrete changes in two variables. The distinguishing characteristic of this formula is that percentage changes are calculated based on the average of the initial and ending values of each variable, rather than initial values. An alternative technique is the endpoint elasticity formula.

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Today, you are likely to spend a great deal of time waiting for visits from door-to-door solicitors looking to buy either a handcrafted bird feeder or a New York Yankees baseball cap. Be on the lookout for slightly overweight pizza delivery guys.
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Potato chips were invented in 1853 by a irritated chef repeatedly seeking to appease the hard to please Cornelius Vanderbilt who demanded french fried potatoes that were thinner and crisper than normal.
"When you play, play hard; when you work, don't play at all. "

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