Households must make three basic decisions: How much of each product or service to demand. How much labor to supply How much to spend today and how much to save for the future Household Demand The options available to households are determined by prices, income and accumulated wealth. These factors set the budget constraint. Households …
Household Demand
Households choose products and services based on: The prices of the products/services as well as prices of substitutes and compliments. The household income and accumulated wealth Tastes and preferences Household's expectations about the future. The set of options available to us are limited by income, wealth and prices (the first two items on the list). …
Elasticity
In a previous article Supply, demand and market equilibrium we discussed the relationship between supply, demand and price. We also saw how governments and companies often try to manipulate the price in Rationing and allocating resources. But how much can a price be manipulated before consumers stops buying the product. How much will demand change in response …
Predicting supply and demand
In a previous article supply, demand and market equilibrium we discussed the relationship between supply, demand and prices. We can use graphs to predict the effects of changes in price and quantity demanded/ supplied to some extend (if all else stays equal). Supply and Demand Curves If the price for a product change, the quantity of …
Rationing and allocating resources
In a previous article Supply, demand and market equilibrium we discussed how prices is determined by supply and demand if all else stays equal. In this article I want to talk about ways in which prices can be manipulated to be something other than the equilibrium price and the effect it has on the economy. Price …
Supply, demand and market equilibrium.
A good understanding of the laws of supply and demand and market equilibrium is very empowering. It helps us predict what prices will do which also affect decisions like where to invest our money, what skills to learn and when to buy things. Households and firms interact in two basic kinds of markets. In output markets firms supply …
Growing the Economy
We often hear our economy is not growing fast enough. Basically this means that the total output of the economy must increase at a greater pace... meaning we must produce more. If the total output grows faster than the population, the standard of living will increase and we will be better off. This does not necessarily mean …
Making it Work 