Using the Washington Post piece on the history of air conditioning: Air conditioning as we know it first appeared in 1902, gradually replacing the fan. You could also think of choice of location as a kind of technology: before air conditioning, people cooled themselves by avoiding living in the South. As the article describes, air conditioning has increased comfort during hot months, enhanced labor productivity in hot conditions, and cheapened building (which previously had to be designed to provide ventilation).

If demand for wheat rises, the price and quantity of wheat rise. If demand falls, the price and quantity of wheat fall.

Both supply curves should be drawn as vertical. The difference is that the demand for the Mona Lisa is enormous and the demand for the Simpson painting is negligible. Thus, the Mona Lisa sells for $30 M, while the Simpson painting might go for 10 cents.

If demand rises for either painting, quantity stays the same (1), but the price rises. If demand for either falls, quantity stays the same but the price falls.

The AS curve looks like the supply curve for the Mona Lisa. The reason is that AS by definition includes all sectors of the economy; thus, when the price level rises, there is no "other" sector to provide additional resources. The original Mona Lisa, in contrast, has a vertical supply curve because it can't be reproduced.

The dashed horizontal line shows the maximum price level. At this price level, AD exceeds AS, so there are economy-wide shortages. Expect economy-wide lines, corruption, and black markets.

The dashed horizontal line shows the maximum price level. Initially, there is no effect. After AD increases, however, the usual shortages emerge. The lesson: price controls may appear to do no harm at first, but have increasingly bad consequences if AD continues to increase after price controls are imposed.

A decline in AD is deflationary, of course; it makes the equilibrium price level fall, and this process of falling is deflation. An increase in AS is also deflationary; the equilibrium price level falls, and again the process of falling is deflation.

If AS shifts, the total quantity of output that can be produced rises. Suppose your PPF shows two goods. Then the AS shift makes it is possible to supply more of both goods. In contrast, the shift in AD merely raises the price level without increasing output. Since the AD shift does not change total output, the PPF cannot have shifted.

AD increases, but it is a one-time increase. The price level permanently doubles, since the nominal quantity of money is twice as large as before. During the transitional period, inflation increases as the old price level moves to its new position. But once you reach the new equilibrium price level, inflation stops; the inflation is only temporary.

GPA=(3*3+4*2+3*3+3*4)/(3+4+3+3)=38/13=2.92.

TSI=(100*.4+150*.3+120*.2+300*.1)=139. Note that if the index weights did NOT add up to 1, we would need to divide (100*.4+150*.3+120*.2+300*.1) by the sum of the weights.

One conceptual problem with GDP is that it does not count black market activity. An alternative definition would estimate black market GDP using anonymous interviews and surveys, then add it to standard GDP figures. Clearly this would tend to increase measured GDP, since it would add a positive quantity to the standard definition.

After the recent hurricane, many commentators described it as a benefit for the local economies. Bastiat would point out that this is confusing effort and result: True, the hurricane may increase the effort people apply in enriching themselves. But at best this effort will only get people back to the same situation they were at prior to the hurricane.