business activity. The transactions motive is income elastic‚ but interest inelastic. 2. Precautionary motive Everyone lays something against a rainy day. Future is always uncertain. Hence people require cash to meet unforeseen contingencies like unemployment‚ sickness‚ accident etc. the demand for this motive depends on the level of income and the nature of the people. This motive is also income elastic‚ but interest inelastic. 3. Speculative motive This motive relates
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Fundamentals of Microeconomics In the world today product and services are both key to the survival of mankind. Depending on the demand from consumers‚ companies will see an increase or decrease of the items they produce or the service rendered. In the article of trends in US gasoline and ethanol use and petroleum production and imports these items will be looked at; as well as a discussion of the fundamentals of microeconomics. First‚ in order to understand what the fundamentals of microeconomics
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$ 65 trillion. Is supply elastic‚ inelastic or unit elastic? ii) Using the midpoint method‚ calculate the income elasticity of demand when the world GDP increases from $ 65 trillion to $ 70 trillion and the price of RMG is $15. Is the good normal or inferior? 2) a) Graphically describe the effect of price ceiling and price floor set by the government. b) The demand for MS-word software is very inelastic whereas the supply is relatively elastic. If an excise tax‚ T‚ is imposed
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STUDY GUIDE FOR FINAL EXAM Remember to bring a #2 pencil‚ eraser‚ non-programmable non-graphical calculator‚ a picture ID and your brain cells You an bring markers or highlighters to help you find consumer and producer surpluses for the graphs in chapters 9 and 7 The final consists of 50 multiple choice questions. Number of questions from each chapter is highlighted. BASIC RULE TO USE WHEN STUDYING: THE MORE RECENT THE MATERIAL‚ THE MORE TIME YOU SHOULD SPEND STUDYING IT Material which was
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shape of the firm’s demand curve is related to the degree of competition in the market. Loosely speaking‚ more competition causes the firm’s demand curve to be more elastic (flatter)‚ because consumers can respond to price increases by shifting their purchases to other firms. Less competition‚ on the other hand‚ implies a more inelastic (steeper) demand curve. Perfect competition and monopoly turn out to be the extreme ends of the spectrum: • • a perfectly
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run (retail) supply of freshly cut flowers is much less elastic than that of pot plants because: -florists cannot keep freshly cut flowers as long as pot plants If demand drops to zero at the slightest increase in price‚ demand is: - Perfectly elastic Price elasticity of supply will be greater when: - firms hold large stocks.‚ some time has passed.‚ firms have spare capacity. If total revenue increases after a price increase‚ demand – inelastic If your income increased by 10% and the quantity of pizza
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1. PRINCIPES OF ECONOMICS-MANKIEW CHAPTER 1- QUESTION FOR REVIEW (18) No 3. What is inflation and what causes it? = Inflation is an increase in the overall level of prices in the economy. Inflation happen because culprit is growth in the quantity o money when a government creates larges quantities of the nation’s money‚ the value of the money. No 5. Explain the two main causes of market failure and give an example of each! = Externality‚ is the impact of one person’s action on the well being
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The Basic Economic Problem What Economics is really about Scarcity Economics is a social science that studies the allocation of scarce resources Scarcity – an unlimited demand for limited resources There simply isn’t enough to go around What are some of the resources that you have? Economic Roles In the economy‚ there are two roles that are played out PRODUCER – also called manufacturers‚ suppliers‚ or sellers. CONSUMER – also called buyers or users Which are you? From the Producers’ Perspective
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Oligopolistic markets‚ such as supermarkets or car manufacturing‚ can be defined in terms of market structure or in terms of market conduct. An oligopolistic market is one that has several dominant firms with the power to influence the market they are in; an example of this could be the supermarket industry which is dominated by several firms such as Tesco‚ Sainsbury’s‚ and Waitrose etc... Furthermore an oligopolistic market can be defined in terms of its structure and its conduct‚ which involve
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Econ 202: PRINCIPLES OF MICROECONOMICS LEARNING OBJECTIVES This list of learning objectives sets out what each student should be able to do at the end of the topic coverage. Student success at achieving the objectives depends on class attendance‚ diligent reading‚ study‚ and commitment to the material. Tests will be constructed on the basis of the stated learning objectives. Topic 1: “What is microeconomics about?” 1.1 Understand the basic role of economics in human affairs 1.1.1 Understand the “basic
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