4.3 - Determination of Equilibrium Income in the Short Run
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Practice Questions
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Define equilibrium in economic terms.
💡 Hint: Think about how supply and demand interact.
What does it mean when we say the price level is fixed?
💡 Hint: Consider how this simplifies our calculations.
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Interactive Quizzes
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What does it mean for the price level to be fixed in macroeconomic analysis?
💡 Hint: Consider how fixed prices help in simplifying the analysis.
True or False: The Law of Diminishing Returns applies when unused resources are available.
💡 Hint: Recall what happens when resources are underutilized.
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Challenge Problems
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Analyze how an increase in production costs could affect equilibrium income in a market with previously fixed prices.
💡 Hint: Consider how supply adjustments might lead to changes in price levels.
Using the concept of elasticity, discuss how a sudden increase in consumer income could affect demand and, subsequently, equilibrium income.
💡 Hint: Think about how consumer purchasing power impacts demand levels.
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