Consumers may be equally happy consuming different goods, though they may need to substitute more of one product in place of eac
h unit removed of the other product. The principle that captures this is known as
1 answer:
Answer:
diminishing marginal rates of substitution.
Explanation:
Based on the information provided within the question it can be said that the principle that captures this is known as diminishing marginal rates of substitution. Like mentioned in the question this refers to the fact that a consumer chooses to replace a product instead of actually buying more. This decreases as you move down the indifference curve as shown below.
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Answer:
The Coronavirus pandemic took the world by surprise and most people were not ready for the far reaching quarantine measures that were put in place. These measures along with the general fear of the disease meant that Consumers were demanding less of goods and services which had the effect of shifting the Short Run Demand curve to the left.
The world also saw travel restrictions put in place which were a serious blow to international commerce because suppliers found it hard to source goods. This reduced the supply of goods and services which also meant that the Short Run Aggregate Supply Curve shifted to the left as well.
The New Equilibrium led to a way lower output at Y¹ which is shows why GDP growth fell into negative.
As a result of decreased output and quarantine measures, companies could not afford to keep their employees and had to let go of a lot of them. This is why the Unemployment rate went up as well.
