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LEAKAGE LINE: A line used in the injection-leakage model representing the relation between non-consumption uses of income (that is, leakages) and national income. The three leakages are saving, taxes, and imports. The foundation of the leakages line is the saving line, which is then enhanced by adding taxes and imports. The other part of the injection-leakage model is a line representing injections. The intersection of the injection and leakage lines identifies equilibrium aggregate output, or Keynesian equilibrium.

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Lesson 21: Factor Demand | Unit 4: Determinants Page: 17 of 24

Topic: Shifting Demand <=PAGE BACK | PAGE NEXT=>

  • The ceteris paribus determinants of factor demand.

  • Factor demand determinants are three ceteris paribus items that affect factor demand, but which are assumed constant when a factor demand curve is constructed. Changes in any one causes a shift of the factor demand curve.
  • What are the factor demand determinants?

    • Product Demand
    • Factor Productivity
    • Other Prices

  • How do they affect the factor demand curve?

    The factor demand curve, like any other curve, can shift in one of two ways:

    • An increase in factor demand is seen as a rightward shift of the factor demand curve.

    • A decease in factor demand is seen as a leftward shift of the factor demand curve.


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KINKED-DEMAND CURVE

A demand curve with two distinct segments which have different elasticities that join to form a corner or 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 based on the interdependent decision-making of oligopolistic firms.

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