As the interested customers will be willing to pay higher prices to purchase these goods. This theory is also part of Keynesian argument. The figure 2.0 shows what happens in demand pull inflation. So as the demand increases the prices also increases moving from AD1 to AD3. Figure 2.0 C. Effects of Inflation Firstly, due to inflation the value of money falls.
3. FINANCIAL RATIO ANALYSIS 3.1. PROFITABILITY (Ho, 2013) mentioned that the gross profit ratio assesses the gross profit generated per dollar sales. A drop in this ratio can signify more competition in the market, lowering selling prices or a higher cost of purchases. A rise in this ratio can signify that the firm has a competitive edge in the market and so it is able to charge higher prices for its products, or the firm is able to obtain its supplies at a lower cost.
Part A Quantity theory of money (QTM) is a theory which proposes that the amount of money and the value of products in the market are related. The theory mainly explains that no matter how many times more the stock of money is multiplied, the alterations in prices will be equal to the alterations in supply of money. A good part of empirical studies suggest to think of money as some asset or any other valuable thing. This way it is easier to grasp the picture of money having a value, which is defined by the interchanges of supply and demand for money. Therefore, when supply of money changes, its value also alters.
DEMAND CURVE Demand is defined as the different quantities people are willing to buy at different prices. As the price of good increases the demand decreases and vice versa. The law of demand states shows an inverse relationship between price and quantity demanded. The demand curve shows the relationship between the quantity of a good a consumer is willing to buy and the price of the good. The equation for that shows the relationship between the quantity demanded and price is as given below: QD = f (P) QD : Quantity demanded P : Price of the commodity.
The relationship between price elasticity of demand and total revenue bring together some important microeconomic concepts (Miller 2012). In the previous question, you can see how raising a price can bring the demand for a product down. This will have an obvious effect on total revenue and will help a firm when it comes time to change its price. There are times when changing the price of a product will not create less or more of a demand for a
INTRODUCTION Economists use a measure of responsiveness called elasticity. Elasticity means how much something will stretch or change in response to another variable. Basically, Elasticity is the ratio of the percentage change in a dependent variable to a percentage change in an independent variable. There are different kinds of economic elasticity. For example, price elasticity of demand, price elasticity of supply, income elasticity of demand, and cross-price elasticity of demand.
1. Quantity Theory Of Money DEFINITION of 'Quantity Theory Of Money ' An economic theory which proposes a positive relationship between changes in the money supply and the long-term price of goods. It states that increasing the amount of money in the economy will eventually lead to an equal percentage rise in the prices of products and services. The calculation behind the quantity theory of money is based upon Fisher Equation: Calculated as: Where: M represents the money supply. V represents the velocity of money.
It deals with how operating profit is affected by changes in variable costs, fixed costs, selling price per unit and the sales mix of two or more different products. i. Project planning Profit planning assists in finding the most profitable combination between selling price, cost and volume, and hence it enables calculations of profit at different sales levels. It assumes that sales volume is the primary cost driver. Therefore, managers need to take measures to increase profits by reducing costs, especially variable costs per unit, which vary with the level of activity.
The income elasticity of demand is used to predict the consumption of the goods and services that will be produced in the near future whereas, the cross elasticity helps a producer to make correct decision and predict how much the demand of their product fall with the fall in the price of its substitute. The elasticity of supply in long run is more elastic than in short run therefore, an enterprising firm can take time to produce their product in such a way that the cost of production is at its minimum, the profit at its maximum and the welfare service at the maximum. The business firm gets enough time to make decision which will help their business in increasing their sales. Therefore, it is important to make right decision to increase the revenue as well as welfare of the
“The per capita consumption of meat is only 6.6 kg and 55 to 60 eggs annually. Meanwhile, as per the standard requirement, 25 to 28 kg of meat and 250 to 300 eggs are required to be consumed by each person. The price of poultry products have more than doubled in the past few years boosting the industry’s prospects. According to market watchers, the average price of chicken meat has gone from Rs125 per kg to