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AGGREGATE EXPENDITURE EQUATION: An equation indicating that aggregate expenditures (AE) are the sum of consumption expenditures (C), investment expenditures (I), government purchases (G), and net exports (X-M), stated as: AE = C + I + G + (X-M). This equation surfaces in the Keynesian economic income-expenditure model in the form of the aggregate expenditures line. However, it's also central throughout the study of macroeconomics, including aggregate demand and the measurement of gross domestic product.

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Lesson 20: Oligopoly | Unit 4: Analysis Page: 15 of 24

Topic: Kinked-Demand Curve <=PAGE BACK | PAGE NEXT=>

  • How and why oligopoly firms have rigid prices can be illustrated with the use of the kinked-demand curve.

  • A kinked-demand curve is a demand curve with two distinct segments with different elasticities that join to form a kink.
  • The two segments of a kinked-demand curve are:

    1. A relatively more elastic segment for price increases.
    2. A relatively less elastic segment for price decreases.

  • The most striking feature of this curve is that it comes it three parts:

    • One part corresponds with the relatively more elastic demand curve for price increases.

    • The second part corresponds with the relatively less elastic demand curve for price decreases.

    • The third part is the vertical line connecting these two segments.

  • This disjointed marginal revenue curve is the key to oligopoly price rigidity.

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CURRENCY

Pieces of paper and metal coins that circulate around the economy as the medium of exchange. Currency is usually (not always, but usually) authorized and used by the national government. U.S. currency is denominated in dollars and issued the Federal Reserve System (paper currency) and the U.S. Department of the Treasury (metal coins). Currency is approximately one-half of the official M1 monetary aggregate tracked by the Federal Reserve System. The other half is checkable deposits maintained by banks.

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Today, you are likely to spend a great deal of time going from convenience store to convenience store trying to buy either 500 feet of telephone cable or a package of 4 by 6 index cards, the ones with lines. Be on the lookout for vindictive digital clocks with revenge on their minds.
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