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Portfolio   Semester Two
Market Failureis the failure of markets to produce at the socially efficient level of output.
Negative externality of consumption     are the bad effects that are suffered by a third party when a good or service is c...
Positive externality of consumption     are the beneficial effects that are enjoyed by a third party when a good or servic...
Negative externality of production     are the bad effects that are suffered by a third party when a good or service is pr...
Positive externality of production     are the beneficial effects that are enjoyed by a third party when a good or service...
Macroeconomicsis the willingness and ability to purchase a quantity of a good or service               at a certain price ...
Circular Flow of Income     is a simplified model of the economy that shows the flow of money through the economy.        ...
Aggregate Demand       is the total spending in an economy consisting ofconsumption, investment, government expenditure an...
Rightward Shift in Aggregate Demand          Average Price Level                                                AS        ...
Leftward Shift in Aggregate Demand          Average Price Level                                                AS         ...
Aggregate Supply            is the total amount of domestic goods and services suppliedby businesses and the government, i...
Rightward Shift in Aggregate Supply          Average Price Level             AS1                                          ...
Leftward Shift in Aggregate Supply          Average Price Level             AS2                                           ...
Long-run Aggregate Supply (Keynesian)          Average Price Level                                   LRAS               O ...
Long-run Aggregate Supply (Neo-classical)          Average Price Level   LRAS               O                             ...
Unemployment           exists when workers are carrying out jobs for which they are over-qualified,that is they are not us...
Real wage unemployment	   	   	   is unemployment that exists when real wages (wages adjusted for inflation) in the econom...
Demand Deficient Unemployment	   	   	   is unemployment that exists when there is insufficient AD in the economy and real ...
Inflationis a sustained increase in the general level of prices and a fall in the value of money
Cost-push Inflation	   	   	   is inflation that is caused by an increase in the costs of production in an economy that shi...
Demand-pull Inflation	   	   	   is inflation that is caused by increasing AD in an economy that shifts the AD curve to the...
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Economic Essential Diagrams 2

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Economic Essential Diagrams 2

  1. 1. Portfolio Semester Two
  2. 2. Market Failureis the failure of markets to produce at the socially efficient level of output.
  3. 3. Negative externality of consumption are the bad effects that are suffered by a third party when a good or service is consumed. Price ($) D = MPB S = MPC = MSC MSB P Welfare loss POPT Negative Externality O QOPT Q Quantity
  4. 4. Positive externality of consumption are the beneficial effects that are enjoyed by a third party when a good or service is consumed. Price ($) S = MPC = MSC Positive Externality Welfare gain POPT P MSB D = MPB O Q QOPT Quantity
  5. 5. Negative externality of production are the bad effects that are suffered by a third party when a good or service is produced. Price ($) D = MPB = MSB MSC S = MPC POPT Welfare loss P Negative Externality O QOPT Q Quantity
  6. 6. Positive externality of production are the beneficial effects that are enjoyed by a third party when a good or service is produced. Price ($) D = MPB = MSB S = MPC MSC Positive Externality P POPT Welfare gain O Q QOPT Quantity
  7. 7. Macroeconomicsis the willingness and ability to purchase a quantity of a good or service at a certain price over a given time of period.
  8. 8. Circular Flow of Income is a simplified model of the economy that shows the flow of money through the economy. Households Savings Investment Government Taxes Income Expenditure spending Imports Exports Firms
  9. 9. Aggregate Demand is the total spending in an economy consisting ofconsumption, investment, government expenditure and net exports.
  10. 10. Rightward Shift in Aggregate Demand Average Price Level AS PL2 PL1 AD2 AD1 O Y1 Y2 Real GDP
  11. 11. Leftward Shift in Aggregate Demand Average Price Level AS PL1 PL2 AD1 AD2 O Y2 Y1 Real GDP
  12. 12. Aggregate Supply is the total amount of domestic goods and services suppliedby businesses and the government, including both consumer goods and capital goods.
  13. 13. Rightward Shift in Aggregate Supply Average Price Level AS1 AS2 PL1 PL2 AD O Y1 Y2 Real GDP
  14. 14. Leftward Shift in Aggregate Supply Average Price Level AS2 AS1 PL2 PL1 AD O Y2 Y1 Real GDP
  15. 15. Long-run Aggregate Supply (Keynesian) Average Price Level LRAS O Real GDP
  16. 16. Long-run Aggregate Supply (Neo-classical) Average Price Level LRAS O Real GDP
  17. 17. Unemployment exists when workers are carrying out jobs for which they are over-qualified,that is they are not using their full skills and abilities or when workers are employed part-time, even though they are available for full-time employment or when workers in a planned economy are undertaking jobs that would not exist in a free market
  18. 18. Real wage unemployment is unemployment that exists when real wages (wages adjusted for inflation) in the economy get pushed up above their equilibrium, either by the government or by trade unions. Average real wage rate AS Unemployment { W1 W AD O Q1 Q Q2 Number of workers
  19. 19. Demand Deficient Unemployment is unemployment that exists when there is insufficient AD in the economy and real wages do not fall to compensate for this. Average real wage rate AS Unemployment { W W1 AD1 AD2 O Q1 Q Real GDP
  20. 20. Inflationis a sustained increase in the general level of prices and a fall in the value of money
  21. 21. Cost-push Inflation is inflation that is caused by an increase in the costs of production in an economy that shifts the SRAS curve to the left. Average Price Level SRAS2 SRAS1 PL2 PL1 AD O Y2 Y1 Real GDP
  22. 22. Demand-pull Inflation is inflation that is caused by increasing AD in an economy that shifts the AD curve to the right. Average Price Level SRAS PL2 PL1 AD2 AD1 O Y1 Y2 Real GDP

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