Readers Question: “Merger activity represents a major force for structural change in competitive markets. Examine the principal objectives underlying such strategic developments and consider the degree of success enjoyed by firms in pursuit of those objectives.” This question is a rather complicated way of saying: Discuss why firms wish to merge. Using examples, discuss whether …
Definition: A contract for difference CFD is a contract which enables you to buy or sell a share in the future. Unlike futures they don’t necessarily have a fixed date for completion. Essentially Contract for difference (CFDs) are used as a way for people to try and make money from predicting future share movements. If …
I wrote a brief explanation to the current credit crunch, breaking it down into 10 stages – including why It occurred and who does it affect. Some common questions on Credit Crisis Why Do US Mortgage Defaults Affect the UK? The US mortgage companies funded their mortgage lending by selling their loans onto other financial …
Readers Question: why are banks still not lending despite the bail out and increase in money supply? If all this time they have taken risk, why cant they take risk anymore? They should have more borrowers now due to low interest rates,if they can help small business who need the money then growth can increase …
The Neo-Classical Theory of Firms makes the following assumptions Firms are profit maximisers. Firms will maximise profits where MR=MC In the short run, firms are subject to diminishing returns. In the short run, capital is fixed, therefore MC is upwardly sloping after diminishing returns sets in. Prices are flexible. If there is a shortage of …
Banks are getting a lot of criticism at the moment and most of it is justified. What mistakes did the banks make? Bonuses which encouraged Risky Short Termism If managers gained short term profit for the bank, they would be in line for large bonuses. If they lost money, they didn’t get a pay cut. …
Has the internet made price discrimination more difficult or easier? Price discrimination is charging different prices to different groups of consumers for the same good. Price discrimination requires that firms Can separate markets into different distinct groups Groups have different elasticities of demand The firm can prevent resale The costs of separating markets are less …
A pyramid investment scheme is one based on false accounting. It is one of the oldest tricks in the book. If you put money into an investment scheme they will take your money and invest it in a variety of shares / commodities / bonds e.t.c. The hope is that the investment fund will choose …