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Investment Decisions in the Economy Depend on the Current Level

question 95

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Investment decisions in the economy depend on the current level of income.


Definitions:

Market Equilibrium

The state in which market supply and demand balance each other, and as a result, prices become stable.

Competitive Industry

Competitive industries are characterized by three factors: (1) firms produce a product or service with very close substitutes meaning demand is very elastic, (2) firms have many rivals and no cost advantage over those rivals, and (3) the industry has no barriers to entry or exit.

Market Demand

The total volume of goods or services that consumers in a specific market are willing and able to purchase at different price levels.

Market Equilibrium

A state in which market supply and demand balance each other, and, as a result, prices become stable.

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