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 AGGREGATE DEMAND DETERMINANT: A ceteris paribus factor that affects aggregate demand, but which is assumed constant when the aggregate demand curve is constructed. Changes in any of the aggregate demand determinants cause the aggregate demand curve to shift. While a wide variety of specific ceteris paribus factors can cause the aggregate demand curve to shift, it's usually most convenient to group them into the four, broad expenditure categories -- consumption, investment, government purchases, and net exports. The reason is that changes in these expenditures are the direct cause of shifts in the aggregate demand curve. If any determinant affects aggregate demand it MUST affect one of these four expenditures.
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 Lesson 12: Elasticity and Demand | Unit 3: Measurement Page: 16 of 25

 Topic: Expenditures And Elasticity <=PAGE BACK | PAGE NEXT=>

The five elasticity alternatives on the demand curve can also be seen on the this total expenditures curve.
• The perfectly elastic point is at origin with a 0 quantity and 0 total expenditures, corresponding with the intersection of the demand curve and the vertical price axis.

• The relatively elastic range is the first half of the total expenditures curve between the 0 million minutes and 5 million minutes, corresponding with the "upper" half of the demand curve.

• The unit elastic point is at the very peak of the total expenditures curve at 5 million minutes, corresponding with the exact midpoint of the demand curve.

• The relatively inelastic range is the second half of the total expenditures curve between the 5 million minutes and 10 million minutes, corresponding with the "lower" half of the demand curve.

• The perfectly inelastic point is at with 0 total expenditures and 10 million minutes, corresponding intersection between the demand curve and the horizontal quantity axis.

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FACTOR DEMAND DETERMINANTS

The three most important determinants that shift the factor demand curve are: (1) product price, (2) factor productivity, and (3) prices of other factors. Comparable to any determinant, these three cause the factor demand curve to shift to a new location. An increase in factor demand is a rightward shift of the factor demand curve and a decrease in factor demand is a leftward shift.

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