The income effect occurs when consumption increases after a price cut or a decrease after a price increase (Hirschey, 2009 p.160). This can also be seen in luxury vehicles. A price cut or promotional offer can increase the sales. A substitution effect occurs when consumption decreases due to the substitution of cheaper products for more expensive products (Hirschey, 2009 p.160). This effect could also occur with luxury vehicles if another automotive company launches a new desirable vehicle consumers would buy instead of the high priced luxury vehicles. For example, in Michigan there since we are the motor city there is a large car cruise coming up. During this cruise Chevrolet is going to be showing its new convertible Camaro. The attraction for an American made muscle car in Michigan is huge. This might cause some luxury car owners to purchase this new eye catching car and save some big bucks. In order to determine the effect of changing prices a price-consumption curve should be used (Hirschey, 2009 p.162). This cur...
... middle of paper ...
...s and diseconomies of scale. The long-run cost curve will determine if running multiple plants will be beneficial. If optimal firm size includes running multiple plants and it produces a cost advantage then this is multiplant economies of scale. But, if running multiple plants results in a cost disadvantage this would result in multiplant diseconomies of scale.
The incremental cost is a change in cost that is caused by a given managerial decision (Hirschey, 2009, p.290). Well the sunk cost does not vary no matter the decision. Both of these types of costs could affect the long-run and short-run cost curve, it all depends what area the decision will affect. If the decision deals with day to day operation these costs would affect the short-run cost functions. But, if the decision deals with long-term planning these costs would affect the long-run cost function.
Need Writing Help?
Get feedback on grammar, clarity, concision and logic instantly.Check your paper »
- Distribution of income in any given economy is known as how the income is allocated between households. This phenomenon is not to be confused with distribution of wealth which looks at the ownership of assets in an economy, as opposed to the income. The topic of income distribution is a very hot subject due to the perceived income inequality in the United States. It is talked about on a daily basis on almost every political talk show, news program, business news show, and the list goes on. The reason for it being such a controversial subject is because the income distribution in an economy affects every single person in that economy.... [tags: Lorenz Curve, Gini Coefficient]
2563 words (7.3 pages)
- When talking about inequality of income distributions within the society, it is inevitable to talk about how it relates to the process of economic development. About more than half a century ago, Simon Kuznets made his hypothesis on the relationship of the two and it was presented as an inverted U-shape curve—the Kuznets Curve. The pattern of the inverted U-shape intuitively indicates the timing characteristic that the inequality increases in the initial stages of development then decreases at the higher level of development.... [tags: inequality, income distribution, development]
1388 words (4 pages)
- When first presented in 1991, the Environmental Kuznets Curve offered an explanation for the relationship between economic growth and environmental quality (Grossman & Krueger, 1991). These early estimates indicated that the quantity of sulfur dioxide, an important environmental indicator, improved as income and consumption increased. These findings were contradictory to the beliefs of the time as, prior to this research, it was commonly assumed that increasing economic development and capitalism would continue to harm the envirnoment and destroy natural resources.... [tags: kuznet curve, nations wealth, simon kuznet]
1627 words (4.6 pages)
- The Phillips Curve Economists agree that unemployment and inflation are two of the major macroeconomic problems of the twentieth century. If a relationship between the two existed then this would be a major break through for the macro management of the economy. Phillips' work was empirical - started with evidence and worked towards a theory. The causation for the Phillips theory was that the level of unemployment caused the rate of change in money wages to be what it was. 'What economic theory lies behind this?' As unemployment decreases the available pull of labour goes down.... [tags: Economics The Phillips Curve Economy Essays]
1327 words (3.8 pages)
- Trouble with the Curve features several ethical questions and situations. During the movie, Clint Eastwood’s character, Gus, works for the Atlanta Braves as a baseball scout (Trouble 2012). A baseball scout travels to games to see how players preform, so that the team knows what their options are for buying new players for their team. During the movie, the younger scout thinks that Gus should lose his job because a he does Gus’s work on the computer, which is supposed to be more efficient. They consider firing Gus because he is older and is having eye failure (Trouble 2012).... [tags: baseball, the curve, women inequality]
1072 words (3.1 pages)
- Madeleine L’Engle was a revolutionary author who developed a female protagonist in the 1960s that became a role model for young women throughout America. L’Engle was born the only child to Madeleine Hall Barnett and Charles Wadsworth Camp on November 29, 1918. The Barnett family was distinguished at the very least. L’Engle’s grandfather, the chairman of the Barnett Bank in Jackson, Florida, ran off to France with his mistress, leaving L’Engle’s grandmother heartbroken (Zarin). The dysfunctional family did not end there.... [tags: dysfunctional families, charles wallace]
1315 words (3.8 pages)
- Even though most of us may not realized it, interest rate actually play an important role in our everyday lives due to its great effect on the buying power. For instances, if the interest rate is higher, people tend to reduce their spending and rather save it in the deposit account due to the large interest that they can gained. However, if the interest rate is lower, they rather spend it than keeping it in the deposit account. The reason for this is because the ups and down of the interest rates have a significant impact on their personal income.... [tags: yield curve, personal income]
739 words (2.1 pages)
- Two Opposing Views of Learning Curve The learning curve is a method of teaching which is based on low standards and consequently encourages students to pursue higher education. Nowadays, the curve is still debated on whether it is beneficial to students or harmful. In his article, “Grading Curve Benefits Students Through Competition,” David Oberman, a finance major, delineates the benefits of the learning curve used in certain colleges. Oberman uses an optimistic, yet vibrant, tone to express the fact that the curve system rewards the high achieving students while at the same time not hindering other students.... [tags: High school, Education, Learning curve, College]
968 words (2.8 pages)
- ... The duration consists of fixed cash flows, or the normal tendency of making the future payments to be present values; the Fixed Income valuation is usually the weighted average of the cash flow times till those fixed cash flow (Coupon rates + par value+ Time line). As a bond is considered to be a function of yield, Any kind of duration will also measures the price changing with negative or positive shocks to the asset or its sensitivity to increasing/ falling yield, the rate of change or the positive or negative bps shocks with regard to yield or the degree by which the Yield ad Price curve will cause for a parallel shift.... [tags: fixed-income, bond products, valuation]
778 words (2.2 pages)
- The Science Behind The Bell Curve The science behind The Bell Curve has been denounced by both the American Psychological Association and the Human Genome Project. Its authors were unqualified to speak on either genetics or intelligence, since their expertise lay in other fields. Their project did not rise through the usual system of academic publishing, and in fact the authors ducked the process of peer review. The Bell Curve was ultimately funded by the wealthy, far-right Bradley Foundation, which used its media connections to launch a massive national publicity campaign.... [tags: Bell Curve Essays]
3306 words (9.4 pages)
- Perfume : The Story Of A Murderer
- The Principles Of Public Relations
- Analysis Of Bernal Diaz Del Castillo 's The History Of The Conquest Of New Spain
- Categorical Imperative, The Universal Law And The Humanity Principle
- The Extreme Capitalist Values Of Industrial America
- The Demise Of The Roman Republics