With a linear demand curve, the section with low price and high quantity (the seciton after the mid-point) will have _________ PED.
inelastic
What are the objectives of firms in a market? (generally)
To maximise profit
Use an AD/AS diagram to explain how a DEPRECIATION in a currency will change GDP growth, unemployment, and inflation as a result of AD shifting right.
(X-M) will increase, as exports are cheaper and imports are more expensive.
AD shifts right.
→ Economic growth increases
→ Inflation Rises
→ Unemployment Decreases
→ Trade balance improves
Explain the process by which a firm moves from the SR to LR in perfect competition
In SR a firm makes Abnormal Profit → This encourages new firms into the market → Market Supply shifts Right → Price decreases → AR/MR for firms goes down until AR = AC and no abnormal profit is made
In the LR only normal profit is made and no new firms enter the market
Define the term: Consumption
Spending on consumer goods and services
State what is meant by Diminishing Marginal Utility
As we consume more of a product, the utility we get from consuming the next product deceases.
Why does minimum wage not cause unemployment to jobs with inelastic labour demand?
Because these jobs are necessary, so a higher minimum wage just means that firms keep the same employment and pay more.
Who Supplies labour in a labour market?
Households (individuals)
What is meant by Geographical Flexibility?
The ability of workers to move around the country easily to find new work