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. If this ratio remains stable while the net profit ratio is falling, which is the case for EYSI; this can signify that the control over expenses is weak. (CIMA, 2012) mentioned that the net profit ratio signifies the profit from trading operations before the interest costs are
If employers are paying employees more then they will raise costs to offset the added expenses. This will cause the buying power of the dollar to decrease, making it so people who received the minimum wage increases will not be making any more money than they otherwise would’ve, and people who did not have their pay increased, will be making even less money then they had used too. This would do nothing but increase the poverty rate even higher, doing exactly the opposite of what the counter argument says it would. The second way this counterclaim is disproven, is because of the increase people will see in the cost of living. With the price of housing, food, etc.
One famous and contested school of thought is Classical Economics. The school of Classical Economics has been called the “first modern school of economic thought.” One of the most famous economists of this genre is Adam Smith; some also place political-economist Karl Marx in the company of Classical economists. Adam Smith and Karl Marx are polar opposites in the political-economic spectrum proponents of capitalism and socialism, respectively. Despite their political differences, they share some similarities; though much of their philosophy has been debated and replaced by the Austrian School of Economics, there are points of value to both Adam Smith’s and Karl Marx’s
If the monopolist raises the price of its good, consumers buy less of it. By adjusting the quantity produced, the monopolist can choose any point at the demand curve , but not off the demand curve. Oligopolist’s Demand Curve: This demand curve was developed by Paul Sweezy. It is also called “Kinked Demand Curve”. A Kinked Demand curve has a kink , because of 2 different segments having different slopes i.e.
This creates some sort of “compromise price” with the consumer, thus yielding the most profit for that product. Calculations showed Product A has an elasticity of -1.36 and a calculated profit maximization price of $302.22, Product B has an elasticity of -2.5 and a calculated profit maximization price of $50.00, and Product C has an elasticity of -1.67
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
New Keynesian models utilize price rigidities, market failures, asymmetric information and bounded rationality schemes to argue against the validity of classical dichotomy. An argument often used in new Keynesian settings is that of \textbf{sticky prices}. According to this idea, prices do not change as easily of quickly as aggregate demand changes and thus quantities must adjust to clear the markets. In monetary terms, if the quantity of money in an economy increases then it cannot be absorbed directly by prices, as monetarism suggests, because it takes time for prices to adjust. For instance, the price adjustment mechanism may be slowed down because printing new menus and price catalogs is costly for firms.
Consumer surplus is the benefit that consumers get if they are willing to pay more for a certain product than the actual market price is. It is also the area under the demand curve and above the market price (1+2+3). Producer surplus, on the other hand, shows us the difference between how much the producer actually receives and the minimum amount they would be willing to accept. In the figure 1 it is represented by the area below the market price and above the supply curve. (4+5+6).
Keynes replaced an employment formula with a price formula. Essentially aggregate nominal prices are fixed and occur at a higher price than the price to clear the goods market. This results in less employment than would occur in a non-distorted market. You can work and produce all you want, but you can 't sell it.. This is important because sticky systems reasonably well do predict the economy while classical ones do
1) Government may intervene in a market in order to try and restore economic efficiency. One of the ways the government intervention can help overcome market failure is through the introduction of a price floors and price ceilings. If prices are seen to be too high, price ceiling or a maximum price could be imposed on a market in order to moderate the price of the product. This policy is often used when there are concerns that consumers cannot afford an essential product, such as groceries. The effect of a maximum price could create a shortage as it could lead to demand exceeding supply for that particular good.