Suppose a monopolist sells in a market with a demand curve p = a – bQ where p is price, Q is output and a = 25 and b = 2. The monopolist needs to replace its existing plant and machinery and has two choices. The first option is to spend $40 and produce at …
Policies to halt the slide of the dollar 1. Increase US interest rates · Higher interest rates will attract more hot money flows into the US and therefore cause an appreciation. · Also higher interest rates will cause an increase in savings and a fall in spending this will help reduce imports into the US …
To recover from a recession there needs to be either a rise in AD or a readjustment in prices and wages. Classical economists argue that a recession will only be temporary because labour and product markets are flexible. However Keynesians argue that wage and price rigidity can keep the economy below full capacity for a …
Economic Cost of Cars 1. Congestion Time lost which has a monetary value Frustration Increase in pollution Increased cost of petrol 2. Pollution Unleaded petrol has helped reduce lead, but there is still a problem of carbon dioxide and nitrogen dioxide exacerbating global warming Also an increase in respiratory problems such as asthma 3. …
Catalytic converters help reduce pollution and therefore have positive externalities. This means that if consumers use them there will be benefits to a third party, because there will be less pollution and health problems. In a free market there may be under provision of catalytic converters, for various reasons. Firstly, because there are positive externalities …
Diagrams showing different types of elasticity – inelastic demand, elastic demand, inelastic supply, elastic supply. The effect of tax Inelastic Demand Elastic demand Elastic Supply Inelastic Supply Effect of elasticity on impact of subsidy Effect of Tax on Elastic Demand Effect of Tax on Inelastic Demand
– Positive economics: based on facts and testable theories e.g. inflation is 2% – Normative economics: based on opinion – Opportunity cost: is the sacrifice foregone of the next best alternative – Demand curve will shift to the right if real incomes rise, price of substitute rises, price of complement falls, changes in taste Giffen …
A merger occurs when two firms join together to form one bigger company. Therefore, the new company will have an increased market share. However, this higher market share will have significant problems. The competition commission will be especially concerned because the new firm is likely to have more than 25% of the market share, which …