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INCOME-PRICE MODEL: An economic model relating the price level (the price part) and real production (the income part) that is used to analyze business cycles, aggregate production, unemployment, inflation, stabilization policies, and related macroeconomic phenomena. The income-price model, inspired by the standard market model, captures the interaction between aggregate demand (the buyers) and short-run and long-run aggregate supply (the sellers).
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Lesson 10: Utility and Demand | Unit 4: On To Demand
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Page: 14 of 21
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Topic:
A Generalized Choice
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- In many cases buyers are making choices between ONE good and EVERY other good that they could be purchasing.
- The presumption is that every other good satisfies the rule of consumer equilibrium.
- The question now becomes: How much beach frolicking do I undertake (or purchase) given that my going marginal utility-price ratio is 3 utils per dollar for other goods?
- Employing the rule of consumer equilibrium, I need to equate the marginal utility-price ratio (MU/P) for beach frolicking with the marginal utility-price ratio for other goods.
MU/P for beach frolicking = MU/P for other goods - Because the marginal utility-price ratio for other goods is 2 utils per dollar, the time I spend at the beach needs generates to generate the same 2 utils per dollar.
- If the price per hour at the beach is $2, then I need to stay at the beach until my marginal is 4 utils, a value generated at 5 hours. This gives me a marginal utility-price ratio (MU/P) for beach activity of 2 utils per dollar.
- I have satisfied the rule of consumer equilibrium!
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INJECTIONS LINE A graphical representation of the relation between the level of aggregate production and one or more injections. The three injections (non-consumption expenditures on aggregate production) are investment expenditures, government purchases and exports. The injections line sequentially adds, or layers, each of these three expenditures depending on the number of sectors used in the analysis (two, three, or four). The slope of the injections line depends on which if any of the expenditures are induced by aggregate production. The injections line is combined with the leakages line (containing saving, taxes, and imports) in the Keynesian injections-leakages model.
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BLACK DISMALAPOD
[What's This?]
Today, you are likely to spend a great deal of time browsing about a thrift store seeking to buy either a genuine fake plastic Tiffany lamp or a microwave over that won't burn your popcorn. Be on the lookout for small children selling products door-to-door.
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This isn't me! What am I?
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A U.S. dime has 118 groves around its edge, one fewer than a U.S. quarter.
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"A winner is someone who recognizes his God-given talents, works his tail off to develop them into skills, and uses those skills to accomplish his goals. " -- Larry Bird, basketball player
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CME
Chicago Mercantile Exchange
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