What do the income effect, the substitution effect, and diminishing marginal utility have in common?
1 answer:
Answer:
They all help explain the downsloping demand curve
Explanation:
The options to the question wasn't provided. The complete question can be in the attached image.
The demand curve slopes downward from left to right. This indicates that the higher the price, the lower the quantity demanded and the lower the price, the higher the quantity demanded.
Income effect is a change in quantity demanded when real income change. Quantity demanded increases when real income increases and decreases when real income falls.
Substitution effect says that consumers would substituite to the consumption of a cheaper good when the price of a good originally consumed increases.
Diminishing marginal utility states that as consumption increases, utility derived from consumption falls and quantity demanded falls.
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Answer:
Therefore, the UK pound is at a discount against the U.S. dollar, because it is worth less in the One-month forward market than in the spot market.
Explanation:
Given:
Selling price = $1.5137
Spot price = $1.5139
We'll calculate how much pound is worth in the forward market.
We'll use the formula:
(selling - spot price )/spot price * 12/months of contract
= -0.0015853
Therefore, the UK pound is at a discount against the U.S. dollar, because it is worth less in the One-month forward market than in the spot market.
Answer:
EV(1) = max(46.8, 44.4, 53.6) = 53.6m
Explanation:
Diagram is shown in the attached file
EV(5) =max(42, 48) = 48m
EV(6) =max(46, 50) = 50m
EV(2) =0.20(42) + 0.80(48) = 46.8m
EV(3) =0.20(22) + 0.80(50) = 44.4m
EV(4) =0.20(-20) + 0.80(72) = 53.6m
EV(1) =max(46.8, 44.4, 53.6) = 53.6m
