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Nat2105 [25]
3 years ago
15

Suppose the price of tomatoes falls, ceteris paribus. Describe the impact the substitution effect and the real income effect wou

ld have on the quantity demanded of tomatoes.
Business
1 answer:
mamaluj [8]3 years ago
3 0

Answer:

Ceteris paribus assumption: Demand curves relate the prices and quantities demanded assuming no other factors change

Explanation:

Ceteris paribus is a  Latin phrase meaning “other things being equal”. If all else is not held equal, then the laws of supply and demand will not necessarily hold.

Demand is the amount of some product a consumer is willing and able to purchase at each price.

IMPACT THE SUBSTITUTION EFFECT AND THE REAL INCOME

A substitute is a good or service that can be used in place of another good or service. A lower price for a substitute decreases demand for the other product and increases the quantity demanded for tomatoes

A change in the price of a good or service causes a movement along a specific demand curve, and it typically leads to some change in the quantity demanded, but it does not shift the demand curve.

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Michael's, Inc., just paid $2.20 to its shareholders as the annual dividend. Simultaneously, the company announced that future d
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The maximum price that should be paid for one share of the company today is $54.895

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The price of a stock that pays a dividend that grows at a constant rate forever can be calculated using the constant growth model of Dividend discount model (DDM) approach. The DDM values a stock based on the present value of the expected future dividends. The formula for price today under this model is,

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