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Price flexibility plays a key role in the classical model by ensuring that the markets reach equilibrium. a. Explain which price adjusts to bring equilibrium in the labor market. Describe how the price adjusts when demand exceeds supply in this market.
b. Explain which price adjusts to bring equilibrium in the loanable funds market. Describe how the price adjusts when supply exceeds demand in this market.
Unit Product Cost
The calculated cost of producing a single unit of product, including direct materials, labor, and overhead costs.
Average Cost
The cost calculated by dividing the total cost of goods available for sale by the total units available for sale.
Financial Advantage
A benefit or edge that contributes to a stronger financial position relative to competitors or within the marketplace.
Constraint
A limitation under which a company must operate, such as limited available machine time or raw materials, that restricts the company’s ability to satisfy demand.
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