The pattern holds true, as one can see a 1% in unemployment corresponds with approximately 2% negative growth. While Okun’s law seems to follow a logical pattern in which GDP is decreased due to reductions in labor, there are many complex interactions underlying the relationship. The larger shift in GDP caused by a smaller shift in unemployment shows is caused by these factors. Some of the factors affecting this relationship include reductions in hours worked by employed people, productivity changes in the labor force, the number of individuals leaving and entering the workforce, and other workplace or labor force influences. What is most revealing about this analysis is that the impact of decrease in GDP seems to be decreasing over time.
Further more , at this point every small business face trade-off , people running small businesses make decision for changes in strategic by comparing benefits and cost at the margin , as long as the marginal profit exceed the marginal cost . It can increase the cost of running the business and to keep their business profit stable, the opportunity cost is that employers may not be able to employ as many employees The higher minimum wage make less skilled workers become useless and benefit the better skilled workers. In the price floor analysis, if the minimum wage is above the equilibrium level, the quantity of labour supplied is larger than quantity demanded .Finally the consequence is unemployment. Therefore the
High rates of economic growth bring about an increase in the aggregate demand and decrease in the unemployment rate and vice versa. This is all due to fluctuations in the business cycle. However the changes in the economic activity do not always lead to immediate changes in the employment level as there is a time lag as business firms tend to operate with excess capacity. • Conditions in
The long run average cost curve is explained by the economies of scale, and diseconomies of scale. It explains why LRAC goes down, and then goes up.As production increases, there are two basic influences at work: Economies of scale, and Diminishing marginal returns.Economies of scale cause average cost to decrease as production increases.Diminishing marginal returns causes average cost to increase as production increases. If Economies of scale outweighs diminishing marginal returns at low volumes, and eventually diminishing marginal returns outweighs economies of scale at high volumes the curve will be a U shape. A typical average cost curve will have a U-shape, because fixed costs are all incurred before any production takes place and marginal costs are typically increasing, because of diminishing marginal productivity.There is an indication of economies of scale if marginal costs are below average costs and average costs decreasing as quantity increase. An increasing marginal cost curve will intersect a U-shaped average cost curve at its minimum, after which point the average cost curve begins to slope upward.
Explain why the Aggregate Supply curve becomes increasingly steeply sloped at levels of RGDP near "full employment" and becomes especially steeply sloped beyond "full employment" RGDP Answer: - Aggregate supply is the relationship between the quantity of goods and services supplied and the price level. Because the firms that supply goods and services have flexible prices in the long run but sticky prices in the short run, the aggregate supply relationship depends on the time frame. The vertical aggregate supply curve satisfies the classical dichotomy for it implies that the level of output is independent of the money supply. This level of output is called the full employment level of output. It is the level of output at which the economy’s resources are fully employed or more realistically, at which unemployment is at its natural rate.
Fuel expenses grew at a faster rate than sales, fuel costs although seeing a fall off in 2009 by 20.52% rose by 29% in 2010. These costs continue to a major challenge for the company as referenced in the 2010’s annual report. Likewise, generation expenses will also increase when fuel increases as oil is the largest expense in that process. Due to efficiencies in the generating plant, the increases in costs were lower than that of fuel. Distribution expenses rose significantly in 2010 by 10.12% from 1.18% in 2009.This was as a result of Hurricane Tomas in 2010 as the distribution network was significantly impacted when several power lies were damaged.
Although inequality has improved in many countries, it has also made this gap between rich and poor much greater in others. Globalization is “a process whereby an increased portion of economic or other activity is carried out across national borders”.1 International inequality is inequality between countries. An economic difference between rich and poor countries is a good example. 2 Inequality can be seen as a relationship between two quantities indicating that one is less than or equal to or strictly less than the other. 3 Globalization maintains a level of inequality between and among rich and poor countries.
Income Inequality – Problems with the Welfare System In recent years, rising inequality in the allocation of income has been the topic of substantial public interest, political awareness, and educational research. Income inequality is a gauge of how evenly the income pie is separated between all affiliates of society. The comparative income, or measure, can characterize how well the deprived are doing economically in contrast to the wealthy. In other words inequality is evaluated by how evenly the income pie is separated between all affiliates of society. With inflation comes rising cost and lower income families’ resulting in higher numbers of welfare recipients.
Short-run cost functions should be estimated using data for which the level of usage of one or more of the inputs is fixed. Usually time-series data for a specific firm are used to estimate short-run cost functions. Analysts should be careful to adjust the cost and input price data (which are measured in dollars) for inflation and to make sure the cost data measure economic cost. The following are the two possible problems that may arise when measuring cost for short-run cost estimation: Correcting data for the effects of inflation Economic analyses often use data from two or more calendar years. Price inflation causes the value of a dollar to fall over time, and so the same dollar amount in two different years will usually represent different amounts of purchasing power.
A decrease in supply, or a rise in prices, could be caused by an increase in the wages paid to the workers in that firm. Currently, the lime market has