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VikaD [51]
3 years ago
13

Distinguish between the substitution and income effects of a price change. If a good’s price increases does each effect have a p

ositive or negative impact on the quantity demanded?
Business
1 answer:
vesna_86 [32]3 years ago
7 0
The economics concepts of income effect and substitution effect express changes in the market and how these changes impact consumption patterns for consumer goods and services. The income effect expresses the impact of increased purchasing power on consumption, while the substitution effect describes how consumption is impacted by changing relative prices. Different goods and services experience these changes in different ways. Some products, called inferior goods, generally decrease in consumption whenever incomes increase. Consumer spending and consumption of normal goods typically increases with higher purchasing power, in contrast with inferior goods.



Read more: What's the difference between the income effect and the substitution effect? | Investopedia http://www.investopedia.com/ask/answers/041415/whats-difference-between-income-effect-and-substitution-effect.asp#ixzz4wcsy3IOK
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Consider a firm with a contract to sell an asset for $154,000 five years from now. The asset costs $90,000 to produce today. Giv
horsena [70]

Answer:

the firm will have a loss of 6.414,97‬

Break-even rate = 11.34%

Explanation:

We calcualte the present value of a lump sum to know the present sale value:

\frac{Nominal}{(1 + rate)^{time} } = PV  

Nominal:  154,000

time               5 years

rate               0.13

\frac{154000}{(1 + 0.13)^{5} } = PV  

PV   83,585.03

the current sale price        83,585.03

given a cost of               <u>   (90,000)      </u>

the firm will have a loss of 6.414,97‬

To break event the present value should be 90,000:

\frac{154000}{(1 + r)^{5} } = 90,000

\sqrt{5}{\frac{154000}{90,000}} -= (1 + r)  

rate = 0.113411345 = 11.34%

6 0
4 years ago
The basic reason why the commercial banking system can increase its checkable deposits by a multiple of its excess reserves is t
Stells [14]

Answer:

B) reserves lost by any particular bank will be gained by some other bank.

Explanation:

Banks "create" money when they make loans or buy securities from private parties. This money creation is the result of the money multiplier = 1 / reserve ratio.

This money creation process is not affected by which specific bank may hold the deposits, since money withdrawn from a bank will end up in another bank. The money multiplier applies to the whole banking system, not just an individual bank or group of banks.

4 0
3 years ago
Sara has a loan with an interest rate of 2% now, but according to the terms and conditions, the interest rate could quadrupole a
guapka [62]

Answer: Variable interest rate loan

Explanation:

Given, Sara has a loan with an interest rate of 2% now, but according to the terms and conditions, the interest rate could quadrupole after 18 months.

That means the interest rate will change after 18 months.

The term that summarize the situations would be "variable interest rate loan"

  • A variable interest rate loan is defined as a loan in which the interest rate charged on the current balance fluctuates over time as market interest rates changes.
  • It mostly generate more interest.
8 0
3 years ago
In which of the following cases should the United States produce more noodles than it wants for its own use and trade some of th
balandron [24]

Answer:

A. Italy has a comparative advantage over the United States in producing wine.

Explanation:

A country has comparative advantage in production if it produces at a lower opportunity cost when compared with other countries. A country should specialise in the production of the good for whuch it has comparative advantage in and import goods for which it doesn't have comparative advantage in its production.

If Italy has comparative advantage in the production of wine and the US doesn't, Italy should produce wine and export to the US. While, US should produce pasta and export to Italy, if has a comparative advantage in the production of pasta.

A country has absolute advantage in the production of a good or service if it produces more quantity of the good when compared with other countries.

I hope my answer helps you

6 0
3 years ago
____ is a small category that refers to the goods produced by one business that has yet to be sold to consumers, and are either
lapo4ka [179]

Answer:

The correct answer is: Inventories.

Explanation:

Inventories are real and concrete assets, that is movable and immovable property. These form the commercial flow of a person or a company. These goods are for sale, hence the commercial nature, or for the consumption of goods and / or services. Inventories are made in a certain period of time.

If a company is commercial, its livelihood is always buying and selling, that is, the exchange of goods and services. With the inventory, the company has an exhaustive control of merchandise during the commercial period, and at the end of it it has the “final balance”, that balance is comparable with that of other years and serves to draw conclusions and from there take certain actions depending of the result. When the goods are being counted for a certain economic period, it is necessary that they appear in the “Current Assets” group, this means that it is all merchandise at the cost that is in the hands of a company.

The concept of inventory has to do with accounting, which is a system for controlling and recording profits (income and expenses), as well as economic operations, in this case carried out by a company or association, it reflects the financial movements that they make.

8 0
4 years ago
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