IndietroMacroeconomics: Supply, Demand, and GDP Fundamentals
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Termini in questo insieme (20)
The Law of Demand states that, other things equal, the higher the price of a good, the smaller the quantity demanded. Demand curves slope downward due to the substitution and income effects.
Demand curve shifts occur due to changes in factors other than price, such as prices of related goods, expected future prices, income changes, population, and preferences.
Substitution effect: When a good's price rises, consumers buy substitutes.
Income effect: A price rise reduces purchasing power, lowering quantity demanded.
Giffen goods are inferior goods for which demand rises as price rises, violating the Law of Demand, often due to strong income effects in extreme poverty.
Supply is the relationship between price and quantity sellers are willing to sell.
The Law of Supply states that higher prices lead to greater quantity supplied, so supply curves slope upward.
Supply shifts due to changes in factor prices, prices of related goods in production, expected future prices, number of suppliers, technology, and natural events.
Market equilibrium occurs when quantity demanded equals quantity supplied at a price where buyers' and sellers' plans balance.
A shortage occurs, meaning quantity demanded exceeds quantity supplied, putting upward pressure on prices.
A surplus occurs, meaning quantity supplied exceeds quantity demanded, putting downward pressure on prices.
An increase in demand shifts the demand curve right, causing shortages at the original price, leading to higher equilibrium price and quantity.
An increase in supply shifts the supply curve right, causing surplus at the original price, leading to lower equilibrium price and higher quantity.
Equilibrium quantity unambiguously increases; the effect on price is ambiguous and depends on the relative shifts of supply and demand.
GDP is the total market value of all newly produced final goods and services in a country in one year, measured by production, income, or expenditure approaches.
Total production value equals total income earned by factors of production, which equals total expenditure on final goods and services: \(Y = C + I + G + NX\).
GDP expenditure components: Consumption (C), Investment (I), Government Purchases (G), and Net Exports (NX = Exports - Imports).
GDP measures production within a country; GNP adds net factor payments from abroad (income earned by nationals overseas minus income earned by foreigners domestically).
Intermediate goods are excluded to avoid double counting; only final goods and services count toward GDP.
GDP misses pollution, natural resource depletion, leisure value, and income distribution, so it may not fully reflect human wellbeing.
Nominal GDP is adjusted for inflation using price indices like the CPI or GDP deflator to calculate real GDP, reflecting true output changes.
The circular flow shows income paid by firms to households (wages, rent, interest, profits) and spending by households, government, firms, and foreign sector on goods and services.