Strikes

British Airways cabin crew will stage a fresh seven-day strike from 3 March in their dispute over pay, the Unite union has said.

The announcement comes during a four-day stoppage by BA staff that is due to finish on Saturday.

The airline said it had flown all customers to their destinations during all the strikes and would do so again.

BA said once contingency plans had been finalised it would publish more details next week.

Unite said the next planned stoppage will start at 00:01 on Friday 3 March and end at 23:59 on Thursday 9 March.

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Questions

1. What other forms of industrial action are there?

2. Using AD/AS how might a strike affect macro economic equilibrium?

3. What factors determine who wins in a strike?

Using AD/AS diagrams

Look at this link as well

AD/AS

All the AD/AS diagrams you ever want to see!

For interpretation click on the image

AD/AS

Examiners can be very helpful, and tell you specifically what effect you have to write about, or they can be unhelpful and leave it up to you to interpret.

You need to know the likely effects of a change in an economic variable on:

1. The price level (P)
2. National income (output) (Y)

Both of these are shown directly on the AD/AS diagram.

3. The level of employment
4. The level of unemployment
5. Public finances, (the balance between government spending and taxation)
6. The Current Account balance (the balance between exports and imports)

The answer you get will depend upon:

1. The ‘current state’ of the economy - is the economy near to full employment, or is there ‘slack’ in the economy.
2. How big the initial change is.
3. The time period being considered.
4. How ‘elastic’ are the responses to the change being considered.

Step three - find the transmission mechanism

You need to fully explain both the:

1. Transmission mechanism – how the initial change in a variable works its way towards the ‘final’ effect, and
2. The ‘final’ effect itself.

You need explain the steps involved, from the initial change to the final effect, and to distinguish between shifts (caused by demand or supply-side shocks) and movements.

Read the whole article not just this extract - very important

AD/AS

Blog from former student showing supply-side..

AD/AS diagrams from Economics Help

• The aggregate demand/aggregate supply, or AD/AS, model is one of the fundamental tools in economics because it provides an overall framework for bringing economic factors together in one diagram.
• We can examine long-run economic growth using the AD/AS model, but the factors that determine the speed of this long-term economic growth rate do not appear directly in the AD/AS diagram.
• Cyclical unemployment is relatively large in the AD/AS framework when the equilibrium is substantially below potential GDP and relatively small when the equilibrium is near potential GDP.
• The natural rate of unemployment—as determined by the labor market institutions of the economy—is built into potential GDP, but does not otherwise appear in an AD/AS diagram.
• Pressures for inflation to rise or fall are shown in the AD/AS framework when the movement from one equilibrium to another causes the price level to rise or to fall.

The AD/AS model allows economists to analyze multiple economic factors.

Macroeconomics takes an overall view of the economy, which means that it needs to juggle many different concepts including the three macroeconomic goals of growth, low inflation, and low unemployment; the elements of aggregate demand; aggregate supply; and a wide array of economic events and policy decisions.

The aggregate demand/aggregate supply, or AD/AS, model is one of the fundamental tools in economics because it provides an overall framework for bringing these factors together in one diagram. In addition, the AD/AS framework is flexible enough to accommodate both the Keynes’ law approach—focusing on aggregate demand and the short run—while also including the Say’s law approach—focusing on aggregate supply and the long run.

Growth and recession in the AD/AS model

We can examine both long-term and short-term changes in gross domestic product, or GDP, using the AD/AS model. In an AD/AS diagram, long-run economic growth due to productivity increases over time is represented by a gradual rightward shift of aggregate supply. The vertical line representing potential GDP—the full-employment level of gross domestic product—gradually shifts to the right over time as well. You can see this effect in AD/AS diagram A below, which shows a pattern of economic growth over three years.

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AD/AS Economic Cycle

AS Macroeconomics - The Economic Cycle (April 2015) from tutor2u

Productivity and Aggregate Supply

Changes in productivity in the economy affect AGGREGATE SUPPLY.

Aggregate supply (AS) is defined as the total amount of goods and services (real output) produced and supplied by an economy’s firms over a period of time. It includes the supply of a number of types of goods and services including private consumer goods,capital goods, public and merit goods and goods for overseas markets.

The following make up AGGREGATE SUPPLY

Consumer goods

Private consumer goods and services, such as motor vehicles, computers, clothes and entertainment, are supplied by the private sector,  and consumed by households. For a developed economy, this is the single largest component of aggregate supply.

Capital goods

Capital goods, such as machinery, equipment, and plant, are supplied to other firms. These investment goods are significant in that their use adds to capacity, and increases the economy’s ability to supply private consumer goods in the future.

Public and merit goods

Goods and services produced by private firms for use by central or local government, such as education and healthcare, are also a significant component of aggregate supply.  Many private firms such as those in construction, IT and pharmaceuticals, rely on contracts to supply to the public sector.

Traded goods

Goods and services for export, such as chemicals, entertainment, and financial services are also a key component of aggregate supply.

Read on and look at the Classical, Keynesian view but also SHIFTS in the AS curve

Key diagrams!

Very important!

You MUST watch this¬!

Remember to watch this!

Aggregate Demand/Supply: key diagrams!

Very important that this is watched until it is totally, thoroughly, understood, absorbed....