Using the AD-AS model, start with a long-run equilibrium and assume velocity V is constant, then analyze the following case:
The pandemic recession is the result of adverse Demand and Supply shocks.
a. What happens to the Aggregate Demand curve and What happens to the Aggregate Supply curve?
b. What happens to output Y and the price level P in the short run?
c. What short-run problems are created for the labor and goods markets?
d. What kinds of stabilization policies are required to stimulate recovery? Describe the 5 specific tools and their directions of change to be used.
The intersection of the Aggregate Demand (AD), Short Run Aggregate Supply (SAS), and Long Run Aggregate Supply (LAS) curves indicates where the economy will operate at "full employment", or maximum productivity.
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Long run average cost curve is known as envelope curve because it is formed by enveloping the short run average cost curves and it helps the entrepreneur in long term planning that is why it is also called planning curve.
b
Because of the price taking nature of the firm in the perfectly competitive market. The supply curve would be the portin of the (Marginal Cost Curve) that disects the (P=Ar=Mr curves). Som from that point up would be the supply curve, to produce below that point would not be beneficial to the establishment. Up sloping and equal to the portion of the marginal cost curve that lies above the average variable cost. The demand curve is also perfectly elastic, this too contributes to the fact.
what is the relationship between long run average cost curve and short run average cost curve?
Because it envelopes the Short Run Cost curves.
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The relationship between these two curves is that a long run average cost curve consists of several short run average cost curves, each of which refers to a particular scale of operation. both curves are u shaped the short run avg cost curve rising because of labour specialisation and better spreading of fixed costs and it rises due to the law of diniminshing returns. the long run avg cost curve falls because of economies of scale and rises because of dis-economies. the long run avg cost curve must comprise of all the lowest points of each of the short run avg cost curve because no firm will operate at a level of higher costs in the long run than in the short run. the long run avg cost curve must always be equal to or lie below any short run avg cost curve because in the long run all factors of production can be variable.
Long run average cost curve is known as envelope curve because it is formed by enveloping the short run average cost curves and it helps the entrepreneur in long term planning that is why it is also called planning curve.
b
By referring to the manufacturer's characteristic curves for the fuse. There are different curves for different types of fuse (e.g. rewirable, cartridge, etc.). Essentially, these curve will tell you how quickly the fuse will operate for any value of overload current.
The bigger the curve, the easier it is to raise the puck. With a smaller curve, you have to use more power to raise it (but not much more). With smaller curves, you have better puck control, and a better backhand. Usually center's have smaller curves because they have to use there backhand more, and wingers have bigger curves.
Because of the price taking nature of the firm in the perfectly competitive market. The supply curve would be the portin of the (Marginal Cost Curve) that disects the (P=Ar=Mr curves). Som from that point up would be the supply curve, to produce below that point would not be beneficial to the establishment. Up sloping and equal to the portion of the marginal cost curve that lies above the average variable cost. The demand curve is also perfectly elastic, this too contributes to the fact.
what is the relationship between long run average cost curve and short run average cost curve?
A firm's short run supply curve
very short
rib