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ACCELERATOR: The ratio between investment expenditures and the change in gross domestic product. This is based on the notion that business investment depends on the rate of growth of aggregate output. If the economy is expanding, in other words, then the business sector invests in more capital goods to produce the extra output needed. This accelerator effect modifies and magnifies the simply multiplier effect based on the induced consumption and the marginal propensity to consume.

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Lesson 9: Consumer Demand | Unit 5: Taking Stock Page: 21 of 22

Topic: Two Considerations <=PAGE BACK | PAGE NEXT=>

  • The law of diminishing marginal utility sets the stage for understanding the law of demand.
  • But it represents only part of the explanation.

  • Two other considerations in our behind the scenes look at demand are:

  • Constrained Choices

  • If marginal utility is not zero, because of constrained utility maximization, then marginal utility is greater than zero and the price buyers are willing to pay is also greater than zero.
  • Other Goods

  • In the real world, I would not merely decide yes or no about the beach. I would weigh beach frolicking with other options.

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AVERAGE FACTOR COST

Total factor cost per unit of factor input employed by a firm in the production of output, found by dividing total factor cost by the quantity of factor input. Average factor cost, abbreviated AFC, is generally equal to the factor price. However, using the longer term average factor cost makes it easier to see the connection to related terms, including total factor cost and marginal factor cost.

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Today, you are likely to spend a great deal of time touring the new suburban shopping complex trying to buy either a set of tires or a birthday gift for your grandfather. Be on the lookout for letters from the Internal Revenue Service.
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Junk bonds are so called because they have a better than 50% chance of default, carrying a Standard & Poor's rating of CC or lower.
"In war, there is no second prize for the runner-up."

-- Omar Bradley, US Army general

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