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...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Elasticity of Supply?Elasticity of supply is the extent to which the supply of goods or services changes compared to a change in the price paid for those goods or services. Like elasticity of demand, elasticity of supply is measured as the percentage change...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Elasticity? Elasticity measures the extent to which the demand for a good changes with the change in another metric. The most common metric is price; but, there can be other things – such as changes in demand or price for other goods.What is Infinite...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Consumer Surplus?A consumer surplus is the value that a consumer receives when purchasing an item above and beyond the value the consumer was required to provide to obtain the good or service. What is a Producer Surplus?A producer surplus is the additional...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Substitute Goods?Substitute goods are alternative goods that satisfy the same need or want for the consumer as the primary good. The substitute good, as the name implies, is an alternative option to purchasing the primary good. For example, a Swiffer is a...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Dead Weight Loss?Deadweight loss is when the economy produces inefficiently and total surplus (either consumer surplus or producer surplus) is lost. Related Topics Budget Constraint Radner Equilibrium Opportunity Cost Opportunity Set Marginal Analysis Utility...
