Due to imposition of price ceiling, the quantity supplied is lower than that of in normal times. In the above diagram the quantity supplied Qs is corresponding to the price Pc, which is the ceiling price. This quantity Qs way is lesser than the equilibrium quantity Qe which the suppliers would have supplied normally at the equilibrium price Pe. The imposition of price ceiling also creates a high demand in the market. Now the consumers would be demanding the quantity Qd at a price Pc which is lower than the equilibrium price Pe.
3. FACTORS THAT INFLUENCE THE ELASTICITY OF DEMAND FOR LABOUR For one to understand, we use the terms elastic and inelastic. According to Mohr, Fourie, and associates (2008:160-162), Inelastic demand refers to when the quantity demanded changes according to a change in price. The percentage change in the quantity is less than the percentage change in the price for the product. Therefore, the price elasticity of demand, or the elasticity coefficient, is greater than zero, but smaller than one.
Generally, the demand of a good is said to be inelastic when the percentage change in its price causes a smaller percentage change on quantity demanded of the good or service. Price inelastic goods or services that have close substitutes like petrol, peak rail ticket, necessities such as salt and tap water and luxury goods such as diamonds with few exact alternatives. Another example of inelastic products is the health care service in America which has been found to be empirically price inelastic. The value is around –0.17. This means that a 1 percent increase in the price of health care can lead to a 0.17 percent decrease in health care expenditures.
The Keynesian View of the AD/AS Model uses an SRAS curve (see figure1), which is horizontal at levels of output below potential and vertical at potential output. Look at the AD/AS figure, for the potential output (Yp), if AD decreases, output is changed but price is constant while increase in AD affects only prices and output is kept constant. Then economy begins at intersection of AD and SRAS at P0 and Yp, starting from the potential out level (Yp) which presents full employment in economy, thus AD is volatile and can fall easily in the recessionary gap, Therefore economy remains in equilibrium (Y1) but below full employment and Keynes supposed that for certain period, the economy will hold recession gap with targeted rate of
The IS-LM model depicts the aggregate demand of the economy utilizing the relationship amongst output and interest rates. In a closed economy, in the goods market, a rise in interest rates reduce aggregate demand, for the most part investment demand as well as investment for consumer durables. This brings down the level of yield and brings about comparing the amount requested with the amount delivered. This condition is equivalent to the condition that arranged speculation breaks even with sparing. The negative relationship between interest rate and output is known as the IS
(4+5+6). We talk about deadweight loss when the economic efficiency decreases – this is usually caused by not achieving the equilibrium for a certain situation (for example by setting a price floor or ceiling). The areas 1, 2 and 4 together represent the consumer surplus
Short-run trade-off plays a key role in the analysis of business cycle where fluctuations in economy activity are measured by the production of goods and services or the number of people employed. However, the Phillips Curve illustrates the trade-off between inflation and unemployment. Alan (1997) has defined that the reliability of the modern Philips curve as the “clean little secret” of the macroeconomics. Stock and Watson (1999) conducted that “inflation forecasts produced by the Phillips curve are more accurate than forecasts based on other macroeconomic variables, such as interest rates, money, and commodity prices. These forecasts can be improved by using the Phillips curved based on the measures of real aggregate activity of unemployment.” All in all, the ten standards of financial matters assume a basic part in how a nation, a firm or a family deals with its rare assets proficiently while keeping up the value pie that fulfills every part 's monetary pie.
DEMAND CURVE Demand is defined as the different quantities people are willing to buy at different prices. As the price of good increases the demand decreases and vice versa. The law of demand states shows an inverse relationship between price and quantity demanded. The demand curve shows the relationship between the quantity of a good a consumer is willing to buy and the price of the good. The equation for that shows the relationship between the quantity demanded and price is as given below: QD = f (P) QD : Quantity demanded P : Price of the commodity.
Marx’s view is to have a classless society. Capitalism and Communism can not be coexist because they are two different thing. I think that Capitalism is the best. The owner will alway get most of the profit and everyone is trying to be a owner if it is a Communist the owner will get the same profit as workers then why be a owner when you get pay the same. Everyone is equal then no one is going to a owner and there will be no jobs.
However, large enterprises such as Wal-Mart, treat their employees with little value as they give them undeserving wages with long hours. Yet, Wal-Mart is one of the biggest corporations on Earth. Wal-Mart has no desire to share the benefits of business success with its employees. The reason for this imbalance is because the outlook of being an employee are changing. Aspiring young people now typically see being an employee leads to owning your own business.