The economic principle of substitution says that when there are two houses in the same neighborhood with the same size, appeal, and utility, the lower-priced one will tend to sell first.
<h3>The economic principle of substitution</h3>
- According to the principle of substitution, the cost of purchasing a substitute that is just as desired tends to establish the upper limit of value, assuming no inopportune delays.
- A shrewd investor would not spend more on an asset that generates income than it would cost to construct or buy an asset of a similar nature.
- According to this theory, the cost of acquiring a comparable substitute property with the same use, design, and revenue determine the maximum value of a property in most cases.
- For instance, why would somebody pay $1,000,000 for a home when they could pay $750,000 for a different but as appealing home in the same neighborhood?
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True. This demonstrates that buyer has confidence on buying products that are branded. She has trust that the product can satisfy her because the brand already earned a reputation in its field. It also shows that she passed scrutiny on the bought product.
Answer:
the farmer's total revenue when she uses the direct channel = 400 x $2.49 = $996
if she uses the indirect channel, her total revenue = 650 x $1.63 = $1,059.50
her total revenue will increase when selling to he supermarkets, but also her variable production costs will increase. This means that it is probable that her total contribution margin decreases even if total revenue decreases.
<u>Calculation of Total Assets:</u>
Total assets based on the given transactions can be calculated as follows:
Cash Received from Investors $6,900
Add: Amount Borrowed from Local Bank $3,900
Add: Supplies Purchased on account $1,190
Add: Equipment purchased $6,900
Less: Cash Paid for purchase of equipment -$2,190
Total Assets = $16,700
Hence based on the given transactions, the company's total assets are <u>$16,700</u>
