Answer: Jimmy's Peanut Farm has to decrease its prices by 2.5% in order to achieve a 1% increase in the quantity of peanuts it sells.
Jimmy's Peanut Farm can increase the quantity sold by 1% only when the demand for peanuts increases. Demand for peanuts will increase only when the price of peanuts decrease. The Price Elasticity of Demand measures the responsiveness of demand to a percentage change in price.
The formula for Price Elasticity of Demand (PED) is given by the formula:
We have:
Percentage increase in quantity 1% or 0.01
Price Elasticity of Demand (PED) 0.40
Re-arranging the PED formula above we get,
Substituting the values in the equation above we get,
In pursing its own interest, an oligopoly firm will decide to increase production by 1 unit as long as the output effect is larger than the price effect. An oligopoly happens when there is limited competition because there are only a small number of producers or sellers in the market. Due to limited competition there is no need for most of these businesses to produce more unless the output is going to produce more and become sustainable for their consumers demand.
Yes and no.the store will hold the dress for a certain amount of time before letting go.although whether the store really holds it would be most likely no<span />
Answer:
has less of an effect on aggregate demand than if households view it as permanent
Explanation:
Tax Cut is an expansionary fiscal policy; where government uses its expenditure, receipt policy to increase aggregate demand.
A tax cut affects aggregate demand by increasing it, as it increases the disposable income & purchasing power. However: if households view a tax cut as temporary, it has less impact then that if it is viewed as permanent.
Such because, a tax cut considered temporary would be seen as a temporary increase in disposable income, purchasing power. However, consumers usually weigh marginal utility of a money unit gained less than marginal disutility of a money unit lost. Simply, increasing standard of living is easier, but degrading even temporarily improvised standard of living again is difficult. So, Consumers are averse to reduce their once raisen standard of living . This would make them change their aggregate demand less firstly itself, if the tax cut is considered to be temporary (to avoid disutility of degraded standard of living after tax cut reversal).
