If there is no shadow economy then total Expenditure(Y) can be equal to total GDP or total income earned, so consumption, investment and government expenditure can be found in the GDP or total expenditure model. Many Entrepreneurs believe that changes in consumer consumption will affect price and then later investment. However economists consider that investment will be dependent on interest rate. Change in price will also affect aggregate demand (AD). Hence AD is the reflection of all of Equilibrium points between IS/LM model this can be seen in the graph below Figure1 (Figure1 Source Blanchard) ... ... middle of paper ... ... by using mix policy Bibliography Keynes,J.M.
333.  Sanford J. Grossman and Joseph E. Stiglitz. Information and Competitive Price Systems, The American Economic Review, pp. 246-253.  Stephen A. Ross, Randolph W. Westerfield, Jeffrey F.Jaffe and Bradford D. Jordan.
Those theories include consumer goods, capital goods, or investment of money or credit. "They may stress fixed capital against circulating or liquid capital" (Haney, 667). However, the overinvestment theory assigned a crucial role to the acceleration principle, according to which "a mere decline in the rate of increase in business sales could gi... ... middle of paper ... ... Butler, Eamonn. Hayek: His Contribution to the Political and Economic Thought of Our Time. USA: Universe Books, 1985.
Assuming wages in the labour market and commodity prices in the goods market to be perfectly flexible PPP theory continued to hold and the expected return between domestic and foreign bonds with the same risk and the same maturity, FPM argue that the relative money supply, inflation expectations, and economic growth as the primary determinant of the exchange rate in the economy. The SPM, which was first developed by Dornbusch (1976), argues that short-term prices and wages tend to be rigid, investors desire to equalize expec... ... middle of paper ... ... monetary policy than to alternative measures of default risk. Furthermore, according to Shalishali (2012) by applying the International Fisher Effect (IFE) theory in her research stated that, IFE is an important concept in the fields of economics and finance that links interest rates, inflation and exchange rates. Bjornland (2008) has find that monetary policy shock now implies a strong and immediate appreciation of the exchange rate. Additionally, he also claimed that the monetary policy shock temporarily lowers output while increasing unemployment and has a negative effect on consumer price inflation.
Two main strategies for pricing are Du Pont’s skimming strategy which emphasizes specialty products that carry a high margin and Dow’s penetration strategy focuses first on pricing low margin commodity goods low to build a dominant market share and then on maintaining that dominant share. Demand determinants can vary a lot in potential demand, sensitivity to price and potential profitability across the market segments. Due to an individual perceived value of a product by each market segment and the evaluation of the cost/benefits tradeoffs the marketer should establish the price strategy. The price elasticity of demand should also be examined and is affected by • the unique value effect: Features/benefits of a product that makes it unique, thereby lowering the price sensitivity of potential customers and raises consumers' willingness to pay higher prices
If demand remains unchanged and supply increases a surplus occurs, leading to a lower steadiness price. If demand remains unchanged and supply decreases a shortage occurs, leading to a higher steadiness price. What is the importance of supply and demand model in any business:- In a capitalistic civilization, prices of the product are not determined by a central authority but it’s the result of buyers and sellers how they are interacting in the markets. A market is just a gathering of buyers and sellers of a particular good or service. Demand and supply model comes when market prices and production are determined.
The consumer’s behavior is based on two factors: (a) Marginal Utilities of goods 'x' and 'y' (b) The prices of goods 'x' and 'y' The consumer is in equilibrium position when marginal utility of money expenditure on each good is the same. The Law of Equi-Marginal Utility states that the consumer will distribute his money income in such a way that the utility derived from the last rupee spent on each good is equal. The consumer will spend his money income in such a way that marginal utility of each good is proportional to its rupee. The consumer is in equilibrium in respect of the purchases of goods 'x' and 'y' when: MUx = MUy Where MU is Marginal Utility and P equals Price Px Py If MUx / Px and MUy / Py are not equal and MUx / Px is greater than MUy / Py, then the consumer will substitute good 'x' for good 'y'. As a result the marginal utility of good 'x' will fall.
Retrieved 4/6/2014. Vergnaud, et al. Meat consumption and prospective weight change in participants of the EPIC-PANACEA study. The American Journal of Clinical Nutrition. Published 2010, issue 92, p. 398-407.