Why are price and quantity inversely related according to the law of demand?

July 7, 2024 No Comments

A: The classic microeconomics supply and demand model shows price on the vertical axis and demand on the horizontal axis. In between them is a downward-slowing demand curve where price and quantity demanded have an inverse relationship. The general concept is intuitive: as goods become

Why are the factors of production important to economic growth?

July 7, 2024 No Comments

A: Real economic growth only comes from increasing quality and quantity of the factors of production, which consist of four broad types: land, labor, capital and entrepreneurship. Saving and discovery are the two basic ways to improve or increase the factors of production. Saving occurs

Why are there no profits in a perfectly competitive market?

July 7, 2024 No Comments

A: The “perfectly competitive market” is an abstract theoretical construction used by economists. It serves as a benchmark to compare existing competition in real markets. Under perfect competition, firms can only experience profits or losses in the short run. In the long run, profits and

Why did the New York Stock Exchange report prices in fractions before it switched to decimal reporting?

July 7, 2024 No Comments

A: Before April 9, 2001, when the Securities and Exchange Commission ordered all U.S. stock markets to switch to the decimal system, prices were reported and stocks were denominated in fractions—in one-sixteenths to be exact. While it seems silly that it took so long for the

Why do banks securitize some debts, and how do they sell them to investors?

July 7, 2024 No Comments

A: Banks may securitize debt for reasons that include risk management, balance sheet issues, greater leverage of capital and to profiting from origination fees. Debt is securitized by the pooling of certain types of debt instruments and then creating a new financial instrument from the

What role does the government play in capitalism?

July 7, 2024 No Comments

A: The proper role of government in a capitalist economic system has been hotly debated for centuries. Unlike socialism, communism or fascism, capitalism does not assume a role for a coercive, centralized public authority. While nearly all economic thinkers and policymakers argue in favor of

Which economic factors most affect the demand for consumer goods?

July 7, 2024 No Comments

A: The consumer goods sector includes a wide range of retail products purchased by consumers, from staples such as food and clothing to luxury items such as jewelry and electronics. While overall demand for food is not likely to fluctuate wildly – although the specific

What strategies do companies employ to increase market share?

July 7, 2024 No Comments

A: Companies increase market share through innovation, strengthening customer relationships, smart hiring practices, and acquiring competitors. A company’s market share is the percentage it controls of the total market for its products and services. Market share is calculated by measuring the percentage of sales or

Which factors are more important in determining the demand elasticity of a good or service?

July 7, 2024 No Comments

A: Demand elasticity measures how sensitive the quantity demanded of a good or service is to changes in other variables. Many factors are important in determining the demand elasticity of a good or service, such as the price level, type of good or service, availability

What types of consumer goods demonstrate the price elasticity of demand?

July 7, 2024 No Comments

A: All consumer goods are governed by the laws of supply and demand, so every type of consumer good “demonstrates” the price elasticity of demand. This does not mean the relationship between demand and price is equal across all types of consumer goods. For example,

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