market disequilibrium Flashcards
when demand is increased who is on the short side of the market
if price is high then demanders will be on the short side of the market,
if price low suppliers will
short side d
the side (either supply or demand) on which the number of desired transactions is least (ex employers are on the short side of labour market)
where is the short side of the market on diagram
thick portion of lines to the left of the new equilibrium (new demand and supply)
wage curve d
curve showing real wage in economy as a whole that has to be paid at a given level of employment to secure adequate worker effort
profit curve d
shows real wage paid when firms choose their profit-maximising price
explain the diagram where it just shows the profit curve
y=real wage
x=workers (employed mil)
profit curve is straight horizontal line,
labour productivity straight dashed horizontal line,
real wage is up to profit curve (also output per worker),
difference between profit curve and labour productivity is real profit per worker
what does the wage curve look like
j,
y=x^2
where is equilibrium in the labour market
where the wage curve meets the profit curve
where is the labour supply curve on the wage and profit curve diagrams
to the right of everything it is a vertical line,
unemployed is the horizontal distance between the equilibrium and the labour supply curve
what would happen to the profit curve if there is less competition in the market
profit curve shifts down so the markup charged by firms is higher,
firms receive more profit because they have greater market power,
also lower level of unemployment
why will there always be some unemployment
if there is none then there can be no cost of job loss,
necessary to motivate workers to provide effort on the job
what happens on the wage curve diagram if there is an increase in the size of the workforce (immigration)
labour supply shifts to the right,
new wage curve to the right of old one,
temporary lower wage vertically down from where it was before on new wage curve,
new equilibrium with same real wage but higher employment
explain what would happen if there was a rent ceiling imposed
there would be excess demand and an opportunity for economic rent if one of the houses could be sold for a higher price (vertically upwards from equilibrium)
explain how a bubble forms in shares
initial good news shifts demand curve to the right,
further multiple shifts to the right as a response to the initial price rise because of expectations of future price rises
fundamental value of a share
measure of the benefit today of holding the asset now and in the future
