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When the price level and income are not constant, demand can fluctuate significantly. An increase in income typically leads to higher demand for normal goods as consumers have more purchasing power, while a decrease in income may reduce demand. Conversely, if the price level rises, consumers may buy less due to decreased purchasing power, leading to a potential decrease in overall demand. These changes can shift the demand curve, affecting market equilibrium and influencing economic activity.
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What is an example of Hicksian demand and how does it differ from other types of demand?
An example of Hicksian demand is when a consumer adjusts their purchasing choices in response to changes in prices, while keeping their level of satisfaction constant. This differs from other types of demand, such as Marshallian demand, which focuses on changes in purchasing choices based on changes in income and prices while maintaining the same level of utility.
Is utility constant along a demand curve?
utility is not constant along the demand curve
'What are the factors affecting demand for land?
technology level of income
Why does the lm curve slope down ward?
The LM curve slopes downward because it represents the relationship between interest rates and the level of income that equates the demand for and supply of money in the economy. As income increases, the demand for money rises, leading to higher interest rates if the money supply remains constant. Conversely, lower income results in decreased demand for money, allowing interest rates to fall. Thus, the downward slope reflects the inverse relationship between interest rates and the level of income in the money market.
If aggregate demand rises what happens to real GDP what happens to the price level?
Inflation.
What is an example of Hicksian demand and how does it differ from other types of demand?
An example of Hicksian demand is when a consumer adjusts their purchasing choices in response to changes in prices, while keeping their level of satisfaction constant. This differs from other types of demand, such as Marshallian demand, which focuses on changes in purchasing choices based on changes in income and prices while maintaining the same level of utility.
Is utility constant along a demand curve?
utility is not constant along the demand curve
'What are the factors affecting demand for land?
technology level of income
If aggregate demand rises what happens to real GDP what happens to the price level?
Inflation.
What is an inferior good and how does it differ from other types of goods?
An inferior good is a type of good where demand decreases as consumer income increases. This is different from normal goods, where demand increases as income increases, and luxury goods, which have high demand regardless of income level.
What is the price level assumed to be in the simple Keynesian model of determination of income?
exogenous and constant
Do you agree with Linders theory that demand patterns which postulate that the level of income in each country determines the type of goods the population will demand?
yes
What determines a demand for a product?
Purchase power,income level,necessarity,willingness
Explain what determine the optimum level of consumption for a consumer?
what determines the optimum consumption of an consumer is their income and their demand for goods and services.
How does a decrease in consumer income cause the demand curve to shift left?
A decrease in consumer income leads to less money available for spending, causing people to buy fewer goods and services. This results in a leftward shift of the demand curve because there is less demand for products at each price level.
What happens when you have a surplus of goods to price?
What happens is there is too much of a good and not enough demand. This is called over supply and usually occurs when the current price level for the good is too high. To sell off the remaining goods, the solutions is to lower the price level and increase demand.
What is Simple theory of Income Determination?
Total income depends on total employment which depends on effective demand which in turn depends on consumption expenditure and investment expenditure. Consumption depends on income and propensity to consume. Investment depends upon the marginal efficiency of capital and the rate of interest. J. M. Keynes made it clear that the level of employment depends on aggregate demand and aggregate supply. The equilibrium level of income or output depends on the relationship between the aggregate demand curve and aggregate supply curve. As Keynes was interested in the immediate problems of the short run, he ignored the aggregate supply function and focused on aggregate demand. And he attributed unemployment to deficiency in aggregate demand.
