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The index ranges from 0 to 1. A perfectly competitive firm charges P = MC, L = 0; such a firm has no market power. An oligopolist or monopolist charges P > MC, so its index is L > 0, but the extent of its markup depends on the elasticity (the price-sensitivity) of demand and strategic interaction with competing firms. The index rises to 1 if ...
The graph below depicts the kinked demand curve hypothesis which was proposed by Paul Sweezy who was an American economist. [29] It is important to note that this graph is a simplistic example of a kinked demand curve. Kinked Demand Curve. Oligopolistic firms are believed to operate within the confines of the kinked demand function.
If the elasticity of demand is greater than 1, it is a luxury good or a superior good. A zero income elasticity of demand means that an increase in income does not change the quantity demanded of the good. Income elasticity of demand can be used as an indicator of future consumption patterns and as a guide to firms' investment decisions.
Depending on how quantities supplied and demanded to vary with price (the "elasticities" of supply and demand), a tax can be absorbed by the seller (in the form of lower pre-tax prices), or by the buyer (in the form of higher post-tax prices). If the elasticity of supply is low, more of the tax will be paid by the supplier.
The supply and demand model implies that by mandating a price floor above the equilibrium wage, minimum wage laws will cause unemployment. [ 43 ] [ 44 ] This is because a greater number of people are willing to work at the higher wage while a smaller number of jobs will be available at the higher wage.
Thirlwall's law: under certain conditions, the long run growth of a country can be approximated by the ratio of the growth of exports to the income elasticity of demand for imports. Titius–Bode law: "a hypothesis that the bodies in some orbital systems, including the Sun's, orbit at semi-major axes in a function of planetary sequence".
Paul Robin Krugman (/ ˈ k r ʊ ɡ m ə n / ⓘ KRUUG-mən; [4] [5] born February 28, 1953) [6] is an American New Keynesian economist who is the Distinguished Professor of Economics at the Graduate Center of the City University of New York.
Elastic properties describe the reversible deformation (elastic response) of a material to an applied stress.They are a subset of the material properties that provide a quantitative description of the characteristics of a material, like its strength.