Question

The price of good B has a pattern such that P = $20 on Monday through Thursday of every week, and P = $25 on Fridays. If speculators begin participating in the market for good B, their actions will likely lead to a(n)_________. in the price of good B on Monday through Thursday and a(n)__________ in the price of good B on Friday.
a. decrease; decrease
b. decrease; increase
c. increase; increase
d. increase; decrease

Answer 1

Answer:

The correct answer is D. increase; decrease.

Explanation:

Speculation consists of the purchase (or sale) of goods with a view to their subsequent resale (repurchase), when the reason for such action is the expectation of a change in the prices affected with respect to the dominant price and not the gain derived from its use, or of some kind of transformation carried out on these or of the transfer between different markets.

A speculative operation seeks not to enjoy the good or service involved, but to obtain a benefit from the price fluctuation based on the theory of arbitration. In an extensive sense, every form of investment that a medium entails is speculative; However, the term is usually applied to that investment that does not entail any kind of commitment to the management of the assets in which it is invested, and is limited to the movement of capital (financial market), usually in the short or medium term.

The speculation is based on the forecast and the perception, so that the speculator can also be wrong if he does not correctly anticipate the evolution of future prices, so he will have to sell cheap something he bought expensive. The speculative market therefore rewards those who know how to predict.