The not good effects would include; The company will probably suffer from sales drop. As the Law of supply and demand states, increasing the prices for goods and services reduces their demand while their supply increases. Customers will prefer buying from the company’s competitors where the prices are relatively cheaper. By this company’s sales will be
Any change in one of the these components would either increase or decrease the GDP of a country. And increase of one of them would increase output, while a decrease in one of these components would decrease output. With this in view, any change in savings rate would affect GDP due to the fact that it causes a change in one of its components, consumption. Higher savings rate causes lower consumption, reducing output. While lower savings rate causes higher consumption, resulting in higher output.
Let’s say if government decides to lower tax from the income, which is going to increase the income of the people, and give them greater purchasing power. And unless if it’s in a deflation/recession period, people to consume more goods and services, which will shift AD to right. As you see graph 1, assuming the country is producing in a full-employment level, the increase in consumption is going to shift AD2 is going to shift right to AD3, and cause inflation as there will be a bigger competition between the consumers to economy’s limited output/AS. And because of high competition, the price is going to rise drastically, P2 to P3, but cause output to rise only small bits, Y2 to Y3, because since it was already in a level of full employment, producers found it hard to hire more workers. As an example, if Korea decides to lower the tax, then Koreans are going to spend their income on consuming gold immediately instead of saving it.
Thirdly, the prices of raw material also will influenced the inflation. For example, if the key inputs such as increase in the price oil, producers have to adjust the output supply or increase the price of the outputs in the market in order to overcome and cope with the rising price oil. When output decline and the price of the output rise, the cost push inflation occurs. Moreover, if the firms become less productive, it allows costs to rise and invariably leads to higher prices. This is because firm used a lot of time to produce the products.
Countries with low inflation rates will have a higher currency since there is an increase in purchasing power., but high inflation will decrease the value of the currency. The balance of payment includes all financial transactions with in a country and the balance of trade describes the difference between a country’s imports and exports. A surplus in the balance of payment would increase the national currency while a depreciation in the balance of payment would decrease it. Also a positive balance of trade, which means that there are more exports than imports, would increase the currency value because there is an increasing demand in a country’s currency. But a trade deficit would result in a currency depreciation for a country since there is more outflow of monetary payments to other countries.
The financial account with deteriorate as a result of foreigners holding fewer domestic assets. Domestic investors will be more likely to invest overseas due to higher rates of return there. Interest rates are low when there is a high level of mone... ... middle of paper ... ...n advance to avoid the higher prices later. This drives demand faster which triggers businesses to produce more as well as hire more employees. The additional income allows people to spend more causing more demand.
Price elasticity is defined in our text as the change in relationship between a change in the quantity demanded and price. When price elasticity is greater than 1, it’s considered “somewhat elastic” so that when the price increases the revenue decreases. This is due to the quantity being changed so significantly it results in a lost in revenue. In a short period of time, this elasticity may not be detrimental but a wide market change could drive away customers and hurt the company. Cross price elasticity is a measure of changes in quantity demands.
High overhead expenses are particularly challenging because they are persistent. These expenses affect your cash flow every day until the problem is corrected. Solution The solution to this problem is simple, but it is not easy. Audit your expenses and cut back where you can. Be careful not to cut too much, as that approach could also hurt the company.
This will reduce demand for domestic products from both domestic and foreign consumers. MOVEMENTS ALONG THE DEMAND CURVE:- As with a demand curve for a particular product, the cause of a movement along an aggregate demand curve will be a change in price, in this case a change in the general price level. A... ... middle of paper ... ...curs at the full employment level. However they argue that it occurs at less than full employment but where shortages in resources are beginning to be experienced, both output and the general price level will rise or if it occurs at a low level of economic activity it will cause a rise solely in output. Figure 28.
This due to two corporations which form a newly company that have a higher purchasing power to reach for a bigger market. In fact, after merger and acquisition take place, the value of shareholder for the newly formed corporation will greater than the sum of shareholder values of a single corporation. Hence, corporation benefits for the cost cutting as the volume of production increases that result in the cost of production per unit being reduced. This eventually enhance the raise economic of scale by producing a product with a lower cost and a better way. Other than that, merger and acquisition lead to a business expansion that contribute an organic growth for a corporation as one corpora... ... middle of paper ... ...oyees find jobs.