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The AD–AS or aggregate demand–aggregate supply model (also known as the aggregate supply–aggregate demand or AS–AD model) is a widely used macroeconomic model that explains short-run and long-run economic changes through the relationship of aggregate demand (AD) and aggregate supply (AS) in a diagram. It coexists in an older and static ...
Engineering economics, previously known as engineering economy, is a subset of economics concerned with the use and "...application of economic principles" [ 1] in the analysis of engineering decisions. [ 2] As a discipline, it is focused on the branch of economics known as microeconomics in that it studies the behavior of individuals and firms ...
The Keynesian cross diagram is a formulation of the central ideas in Keynes' General Theory of Employment, Interest and Money. It first appeared as a central component of macroeconomic theory as it was taught by Paul Samuelson in his textbook, Economics: An Introductory Analysis. The Keynesian cross plots aggregate income (labelled as Y on the ...
Allocative efficiency is a state of the economy in which production is aligned with the preferences of consumers and producers; in particular, the set of outputs is chosen so as to maximize the social welfare of society. [ 1] This is achieved if every produced good or service has a marginal benefit equal to the marginal cost of production.
In an economic model, an exogenous variable is one whose measure is determined outside the model and is imposed on the model, and an exogenous change is a change in an exogenous variable. [ 1]: p. 8 [ 2]: p. 202 [ 3]: p. 8 In contrast, an endogenous variable is a variable whose measure is determined by the model.
v. t. e. In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables an increase in scale that is, increased production with lowered cost. [ 1]
Aggregate income is a form of GDP that is equal to Consumption expenditure plus net profits. 'Aggregate income' in economics is a broad conceptual term. It may express the proceeds from total output in the economy for producers of that output. There are a number of ways to measure aggregate income, [ 5][ 6] but GDP is one of the best known and ...
Consumption function. In economics, the consumption function describes a relationship between consumption and disposable income. [ 1][ 2] The concept is believed to have been introduced into macroeconomics by John Maynard Keynes in 1936, who used it to develop the notion of a government spending multiplier.