An explanation of the inverse relationship between bond yields and the price of bonds Readers Question: Why does buying securities reduce their yield? Suppose the government issued a £1000, 5-year treasury bond at an interest rate of 5%. This means that if you bought the treasury bill at £1,000 you will receive a fixed interest …
If you speak to someone of the older generation, it is not long before they will start saying something like: “When I was a lad, you could get a pint of beer for only 10p, its outrageous how much it costs these days” Economies are more likely to experience inflation than deflation. Despite fall in …
Changes in price cause signals in the market mechanism. For example, if there is an increase in demand this will lead to a higher price and a movement along the supply curve. However, in the long run, high prices act as an incentive for firms to supply more. Therefore firms will expand their production or …
The Common Agricultural Policy (CAP) is a European policy which involved: Setting minimum prices for many agricultural products Setting import tariffs to protect from cheap imports EU purchases of surplus food to maintain minimum prices Since 2005, farmers have been subsidised through Single Farm payments (SFP) and rural development funds The impact of minimum prices …
When calculating elasticity of demand there are two possible ways. Point elasticity of demand takes the elasticity of demand at a particular point on a curve (or between two points) Arc elasticity measures elasticity at the midpoint between the two selected points:
What causes price fluctuations for the supplier in an agricultural market such as coffee/tea? Coffee and tea are agricultural products, and therefore supply can be variable depending on several factors behind the control of producers (weather, disease). Furthermore, because demand and supply are inelastic, any change in supply can cause a significant change in price. …
Earlier in the year, Sony reduced the price of its PlayStation VR bundle from $499 to $449, a significant 10% reduction in price. Given there is significant brand loyalty towards PlayStation (and inelastic demand), what are the possible economic reasons behind cutting the price? Complementary products One very strong reason is to make profit from …
The oil price is determined by supply and demand side factors. Rising oil prices are indicative of rising demand and/or shortages of supply. The oil price is also affected by market speculation. Rising Demand Increasing demand will push up the price of oil. A short-term rise in demand could lead to a significant increase in …