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A change in the rate of unemployment will hence result to a change in the demand and supply hence affecting the equilibrium market.
People form expectations about prices; quantity supplied and inflation based on previous information. If individuals expect a shortage of goods, they will increase demand to store the goods for the scarce season. Sellers will however hold the goods and hence reduce supply since they anticipate increased costs during the scarce period. The same happens in case the customers and sellers expect an increase in prices (Tucker, 2010). Use of past information to form expectations is not efficient as it may result to wrong predictions hence affecting the equilibrium market negatively.
Unemployment and expectations hence affect the aggregate equilibrium between supply and demand. The government should, therefore, develop measures to influence this non-price factors affecting demand. The economy will hence operate at equilibrium by avoiding surpluses or
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A basis proposition of Keynesian theory is that the equilibrium level of income and output depends on the economy’s aggregate spending for output. If aggregate spending is less then demand will be less and it results in unemployment and less national output.
Aggregate supply on the other hand represents the amount of products that an economy can produce. Under normal circumstances, aggregate demand should equate to aggregate supply. The studying these concepts of aggregate supply and demand helps in understanding macroeconomics at a wider level.
The aggregate demand curve reflects price levels for goods and services produced domestically and which consumers, government, foreigners and businesses are willing to purchase. It slopes downwards to the right with the decrease in price levels with the increase in demand.
This results in the emergence of an economic equilibrium for both quantity and price. Considerations of the power of supply and demand within the market date as far back as the 14th century. This paper will consider the subject of supply and demand, discussing its inherent provisions and assumptions.
In regards to the British economy, they are certainly considered as being in this category. In order to come to a clearer and more knowledgeable understanding of the issue of the British economy and how supply and demand factors affect it, we must thoroughly address and investigate the key factors in regards to this subject.
The curve is the representation of the total production launched by the country with reference to the total income gained. From the graph it is concluded that a straight line at an angle of 45o is drawn between the sum of income received and the sum of the production.
McHugh (6), illustrates that Saint Patrick was captured by pirates who sold him during his youth. The pirates managed to sell him to chieftain who instructed him to be looking after a herd of cattle. According to Saint
The article was written on 19th March, 2012, a time when consumer prices had consistently gone up over a few months. A declining U.S dollar value triggered increased oil prices in the international markets,
Real values of GDP are adjusted for inflation, but nominal values of GDP are not so adjusted, and therefore the nominal GDP may appear to be higher than the real GDP. Real GDP refers to the total market values of the outputs measured in constant prices, but not