Changes In Aggregate Demand And Short-Run Aggregate Supply

The influence that total cost has on short run production cause variable costs to increase or decrease mirroring the total costs that incur as total costs are equal to variable costs. As production increases also, total costs will persist to increase as well. This occurs due to the fact that an increase/decrease in variable costs is required when raw materials, output and/or labour increases/decreases.

Any change that lowers the quantity that buyers wish to purchase at any given price shifts the demand curve to the left.

#5. Other things equal, what effects would each of the following have on aggregate demand or aggregate supply? In each case use a diagram to show the expected effects on the equilibrium price level and the level of real output.

18. Which of the following would cause the aggregate demand curve to shift to the

2.) Which curve(s) change and based on the lists in the text of what causes demand and supply to shift what are the causes of theses shifts? D1 changed moving leftward indicating a decrease in demand due to a technological change: a technological setback causes a decrease. This causes price to go down as well as the demand is lower.

How do the concepts of macroeconomics help you understand the factors that affect shifts in supply and demand on the equilibrium price and quantity?

For instance, if someone's income grows, then his demand for goods will increase, shifting his demand curve to the right. This will lead to a higher quantity being consumed at a higher price, ceteris paribus. Conversely, there can be a negative effect that shifts the supply curve to the left where a lower quantity is consumed at a lower price, ceteris paribus. This can occur when the price of substitutes falls or consumers begin to lose their taste for the product.

Refer to the sets of the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves. Use the graphs to explain the process and steps by which each of the following economic scenarios will shift the economy from one long-run macroeconomic equilibrium to another equilibrium. Under each scenario, elaborate the short-run and long-run effects of the shifts in the aggregate demand and aggregate supply curves on the aggregate price level and aggregate output (real GDP).

Three reasons the aggregate-demand curve slopes downward are the wealth effect, the interest-rate effect, and the exchange rate effect. The wealth effect explains that when the price level decreases, each consumer is wealthier because the real value of his or her dollar has increased. Wealthier consumers spend more, increasing the demand for consumption goods and services. Conversely, if the price level rises, the real value of the dollar will decrease, effectively making consumers poorer. Poorer consumers will spend less on consumption, decreasing the demand for goods and services.

The rightward shift of the AD curve causes prices and output to rise, but the latter rises only temporarily as the already tight labor market gets tighter, leading to higher wages and a leftward shift of the AS curve, with its concomitant increase in P* and decrease in

TCO A- Illustrate how the price mechanism, in response to changes in other demand or supply factors leads to a new market equilibrium price and level of output.

Because the economy as a whole, AD and AS interact can influence level of price and level of output in the country. Change in AD will lead to change in real GDP, change in real GDP will lead to change in AS, change in AS will change price level. As shown in figure 2, when aggregate demand equal to aggregate supply, the output level Y and price level P will achieve an equilibrium. Change in AS and AD will lead to important effects on unemployment, inflation and price. In short rum, if price level below P, there are more demand than supply, firms will increase production and rise prices to earn more profit, so the excess demand will cause price level back up to the equilibrium level. If price level was above P, some goods and services will surplus, in order to sell more to earn a profit, firms will reduce their prices, or, firms will produce less to decrease loss. Finally, price level will come back to P, macroeconomic equilibrium achieved. (Colin and Susan, 2015)

Supply and demand for products, currencies and other investments creates a push-pull dynamic in prices. Prices and rates change as supply or demand changes. If something is in demand and supply begins to shrink, prices will rise. If supply increases beyond current demand, prices will fall. If supply is relatively stable, prices can fluctuate higher and lower as demand increases or decreases. Effect on Short- and Long-Term Trends

This is due to the fact that unemployed consumers have less income and thus less money to purchase items. The small amount of unemployment insurance would be spent mostly on necessities instead of wants. Having less demand would naturally decrease the price of supply. However prices are not dropping like expected because of the inflation we are seeing due to the amount of money that has been printed and borrowed. Second, an economy with low expectations or consumer confidence will also bring aggregate demand down. The vast majority of consumers and businesses are uncertain of their economic situation in the near future. More individuals fear of losing their jobs given the current state of the economy. Therefore, they are “tightening their belts” and trying to save for uncertain times ahead. When consumers feel safe in their job and confident of wages/promotions increasing then they will spend more and save less, the opposite is true today. Next, consumer income will obviously affect aggregate supply and demand. The more money individuals have the more they spend on things they want. Therefore, demand for normal goods would increase and demand for inferior goods would decrease. Consumer income is down in our economy putting downward pressure on normal goods demand and increase on inferior goods demand. Finally, interest rates effects on aggregate supply and demand are

Explain for each event whether it changes short-run aggregate supply, long-run aggregate supply, aggregate demand, or some combination of them.