by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Potential GDP? An AS curve’s slope changes from nearly flat at its far left to nearly vertical at its far right. At the far left of the aggregate supply curve, the level of output in the economy is far below potential GDP, which we define as the amount...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Labor Market Equilibrium? The labor market is made up of workers and firms. The number of works in the market increases as wages rise. The number of employees rise (hires by firms) as the wage decreases. Equilibrium in the labor market is when the supply of...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Wage Elasticity? The concept of elasticity applies to any market, not just markets for goods and services. In the labor market, for example, the wage elasticity of labor supply—that is, the percentage change in hours worked divided by the percentage change in...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Elasticity of Savings?Elasticity of savings is the percentage change in the quantity of savings divided by the percentage change in interest rates. That is:If the government passes laws that cut taxes on savings (allowing the return on savings to rise), the...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is a Tax Incidence? Tax incidence means the extent to which a tax burden imposed by the government is shared between consumers and producers of the good or service subject to the tax. Tax incidence commonly arises in the context of taxes on alcohol, tobacco, and...
