it doesn't make sense to have a negative quantity, so we discard this solution.
To find the quantity where the long-run average cost (LAC) is at a minimum, we need to differentiate the long-run total cost (LTC) function with respect to quantity (q) and set it equal to zero.
LTC = 200q - 20q + q^2
To find the derivative, we differentiate each term separately:
dLTC/dq = 200 - 20 + 2q
Setting the derivative equal to zero and solving for q:
200 - 20 + 2q = 0
2q = 20 - 200
2q = -180
q = -180/2
q = -90
However, it doesn't make sense to have a negative quantity, so we discard this solution.
In this case, the long-run average cost function does not have a minimum. It is an upward-sloping curve, indicating that the average cost increases as the quantity produced increases. This means that there is no specific quantity at which the average cost is at a minimum.
Moving on to part b, the lowest possible average cost can be found by calculating the average cost at different quantities and selecting the minimum value.
The average cost (AC) is calculated by dividing the total cost (TC) by the quantity (q):
AC = LTC/q
Substituting the long-run total cost function:
AC = (200q - 20q + q^2)/q
AC = 200 - 20 + q
To find the lowest possible average cost, we need to minimize the AC function. Since the AC function is a linear function with a positive slope, the lowest average cost will occur at the minimum value of q.
However, since we have already determined that the LTC function does not have a minimum, there is no specific quantity at which the average cost is at a minimum. The lowest possible average cost will depend on the specific quantity produced and the corresponding costs associated with that quantity.
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The price of oil is sitting at its highest level in more than a decade and is on the verge of hitting a new record in the wake of Russia’s invasion of Ukraine. Fuel prices at the pump are driven largely by the wholesale price of energy which has shot up due to tensions over whether Russia will invade Ukraine. If the situation in Ukraine deteriorates, oil and gas supplies from Russia to Europe may be interrupted, pushing up wholesale prices further. The supply of oil and gas has already struggled to keep up with growing demand as the global economy picked up in recent months as Covid restrictions eased. Approximately two-thirds of petroleum products are consumed by transportation alone, while industrial uses, including the manufacturing of plastics and road construction materials such as asphalt, account for 28 per cent. Residential, commercial and electrical power account for the remaining 6 per cent.
Read the above article and answer the following questions:
Q3a. Draw a basic aggregate demand and aggregate supply graph (with LRAS constant) that shows the economy in long-run equilibrium. With reference to the business cycle and the AD/AS model, explain whether the increase in the price of oil has caused the economy to be in a recessionary or expansionary period.
Show the resulting short-run equilibrium on your graph and how the economy adjusts back to the long run equilibrium.
The increase in the price of oil can be analyzed using the AD/AS model to determine the impact on the economy's business cycle. The graph shows the long-run equilibrium and the subsequent short-run equilibrium, illustrating whether the economy is in a recessionary or expansionary period.
In the AD/AS model, the long-run equilibrium occurs when aggregate demand (AD) intersects with the long-run aggregate supply (LRAS) curve. This point represents the economy operating at its potential output level. The graph would show a vertical LRAS curve intersecting with the AD curve at the long-run equilibrium point.
With the increase in oil prices, the cost of production for firms rises, leading to a leftward shift of the short-run aggregate supply (SRAS) curve. This shift results in a higher price level and lower output in the short run. The short-run equilibrium occurs where the AD curve intersects with the new SRAS curve.
Regarding the business cycle, an increase in oil prices causing a leftward shift of the SRAS curve would suggest a contractionary effect on the economy. This indicates a recessionary period with higher prices and lower output than the long-run equilibrium. Over time, as the economy adjusts, factors such as wage adjustments, technological advancements, and changes in expectations would lead to a return to the long-run equilibrium, with output returning to potential and prices stabilizing.
Therefore, the graph would illustrate the short-run equilibrium with lower output and higher prices due to the increase in oil prices, and the subsequent adjustment back to the long-run equilibrium as the economy adapts to the new cost conditions.
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Discuss the importance of a Tourism Master. Identify any
challenges to the current master plan for your selected destination
and recommend any needed improvements.
A Tourism Master Plan is essential for destination management, but challenges may arise. Recommendations for improvement can address sustainability, infrastructure, and stakeholder engagement.
A Tourism Master Plan plays a crucial role in destination management by providing a comprehensive framework for sustainable tourism development. It helps guide the growth, infrastructure, and marketing strategies of a destination. The plan should consider factors such as visitor experience, environmental impact, community engagement, and economic benefits.
Challenges to the current master plan for a destination can vary but may include issues such as inadequate infrastructure, overcrowding, environmental degradation, and insufficient stakeholder collaboration. For instance, a destination might face challenges related to carrying capacity, where the influx of tourists exceeds the destination's ability to manage the impacts effectively.
To address these challenges, improvements to the master plan can focus on enhancing sustainability measures, such as promoting responsible tourism practices, managing visitor flows, and protecting natural and cultural resources. Additionally, infrastructure development to support tourism needs, including transportation, accommodation, and facilities, should be considered.
Engaging with stakeholders, including local communities, businesses, and government authorities, is vital for successful implementation. Continuous monitoring, evaluation, and adaptability of the master plan are also crucial to ensure its effectiveness in meeting evolving tourism demands and addressing emerging challenges.
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Kayla wanted to open her own business. She spent a few hours putting together a marketing plan. The most likely reason why Kayla will not receive a loan would be when
she does not have a good idea for a business
she already has all of the capital needed to start
the bank officer does not like her dress
she does not develop a thorough business plan
A business plan is a comprehensive document that outlines a company's concept, target market, marketing plan, financial situation, management team, competition, and other important details. Therefore, the most likely reason Kayla will not receive a loan would be if she does not develop a thorough business plan.
Kayla has worked to put together her marketing plan and wants to start a business. The most likely reason Kayla will not receive a loan would be if she doesn't develop a thorough business plan.A marketing plan is only a portion of the entire package that a business loan officer considers when evaluating a request for a loan. The loan officer would look for the most comprehensive business plan possible as part of the process to determine if the loan should be granted to Kayla. The bank or lender requires a thorough business plan to show proof of what the money would be spent on, how it will be utilized, and what the expected profit and loss statement would be after the company begins to generate revenue.A business plan is a comprehensive document that outlines a company's concept, target market, marketing plan, financial situation, management team, competition, and other important details. Therefore, the most likely reason Kayla will not receive a loan would be if she does not develop a thorough business plan.
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1) Write a Communication Plan for a company, non-profit organization, product, or service of your choice; (Company: Coca-cola)
2) Develop at least four creative pieces for the implementation of your Communication Plan;
3) Clearly explain what formats will be used and channels for communication.
4) Prepare PowerPoint slides reflecting the strategy of the plan.
Communication Plan for Coca-Cola:
1) Objectives:- Increase brand awareness and perception.
- Promote new product launches and initiatives.- Enhance customer engagement and loyalty.
- Educate and inform the public about sustainability efforts.
2) Target Audience:- General consumers of all ages and demographics.
- Health-conscious individuals.- Socially and environmentally conscious consumers.
- Potential and existing business partners.
3) Communication Strategies:- Advertising: Utilize TV, radio, print, and digital media platforms for brand and product promotions.
- Sustainability Campaigns: Communicate the company's sustainability initiatives through various channels to raise awareness and promote responsible consumption.
4) Creative Pieces:a) TV Commercial: A visually captivating ad showcasing Coca-Cola's iconic brand, emphasizing moments of joy, happiness, and togetherness.
b) Digital Content Series: Engaging videos and articles on the company's website and social media platforms, highlighting the Coca-Cola system's sustainability efforts.c) Interactive Social Media Campaign: Encourage consumers to share their Coca-Cola experiences using a specific hashtag, featuring user-generated content on Coca-Cola's official social media accounts.
d) Print Advertisements: Eye-catching print ads in magazines and newspapers showcasing new product launches and limited edition designs.
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The term demand chain suggests a sense and respond view of the market which starts by identifying the needs of target customers and organize recourses to create customer value. O True O False
The given statement "The term demand chain suggests a sense and respond view of the market which starts by identifying the needs of target customers and organize resources to create customer value" is true.
The process of the production of goods and services involves a chain of interrelated activities. In business terms, this chain is known as the supply chain. It covers all the events and activities in the production of a commodity from its inception to its distribution in the market.
In this way, the supply chain consists of all the events and actions that are necessary to move the product from the producer to the customer. On the other hand, the demand chain is the process that is triggered by a customer order, which is designed to deliver goods or services in response to customer demand. It involves all the events and actions that are necessary to satisfy customer requirements.What is a market?A market is defined as a group of potential buyers or sellers who come together to perform the functions of buying and selling.
It is a place where buyers and sellers interact to exchange goods or services for money or other goods. The market may be local or global, and it can include different types of commodities or services that are traded for money.
The demand chain approach for Market:The demand chain approach is all about identifying the needs of target customers and organizing resources to create customer value. It involves understanding the needs of customers and delivering the right product or service to the right customer at the right time. The demand chain process starts with the identification of customer needs and ends with the delivery of the product or service to the customer. It requires a sense and respond view of the market to be effective.
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a) If fixed costs are 15 and the variable costs are 22 per unit, (1) Write down expressions for total cost (TC), average cost (AC) and marginal cost (MC). (9 Marks) (ii) Find the value of Q which minimizes AC and verify that AC = MC at this point.
Answer: MC = ΔTC/ΔQMC = 22
the value of Q that minimizes AC is approximately 23.32.
Given that the fixed costs are 15 and the variable costs are 22 per unit. Let us find the expressions for total cost (TC), average cost (AC) and marginal cost (MC).(i) Expressions for total cost (TC), average cost (AC) and marginal cost (MC):Total Cost (TC):It is the sum of the fixed cost and variable cost per unit. It can be expressed asTC = Fixed Cost + (Variable Cost x Quantity)
TC = 15 + 22Q
Average Cost (AC):It is the cost per unit and can be expressed as
AC = Total Cost/Quantity
AC = (15 + 22Q)/QAC = 15/Q + 22
Marginal Cost (MC):It is the additional cost of producing one more unit and can be expressed as
MC = ΔTC/ΔQMC = 22
(ii) To minimize the average cost (AC), we take the derivative of the average cost (AC) with respect to Q, equate it to zero, and find the value of Q that makes the derivative zero. We can use this value to show that the AC = MC at that point.Average Cost
(AC) = (15 + 22Q)/Q = 15/Q + 22
Differentiating AC with respect to Q:
AC = 15/Q + 22d(AC)/d
Q = -15/Q^2d(AC)/dQ + 22 = 0-15/Q^2 + 22 = 0-15 = -22Q^2Q^2 = 15/22Q = √(15/22)
We can substitute this value of Q into the expression for the marginal cost (MC) and the average cost (AC) and compare them.
MC = ΔTC/ΔQ = 22AC = 15/Q + 22 = 15/(√(15/22)) + 22 = 23.32
Since AC = MC at the point, we can conclude that the value of Q that minimizes AC is approximately 23.32.
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1. What type of report would you suggest be written in each of the following cases? Explain the reason behind your answer. Choose from the four types we have covered e.g. Memo, Short Technical Report, Long Management Report, and Long Technical Report)
A. The president of the company has asked for a study of the company’s pension plan and its comparison to the plans of other firms in the industry.
B. You have been asked to write up a marketing experiment, which you recently completed, for submission to the Journal of Marketing Research.
C. Your division manager has asked you to prepare a forecast of promotional budget needs for the division for the next 12 months.
D. The National Institutes of Health has given you a grant to study the relationship between advertising of prescription drugs and subsequent sales of those drugs.
Long Management Report would be the type of report suggested for writing a study of the company’s pension plan and its comparison to the plans of other firms in the industry.
A long management report would be appropriate in this situation as it is detailed, analytical and involves complex data analysis.
B. Short Technical Report would be the type of report suggested for writing up a marketing experiment, which you recently completed, for submission to the Journal of Marketing Research. A short technical report would be appropriate in this situation as it is concise, straightforward and presents data and findings.
C. Memo would be the type of report suggested for preparing a forecast of promotional budget needs for the division for the next 12 months.
A memo would be appropriate in this situation as it is a brief message or note that is used to send information or instructions within an organization.
D. Long Technical Report would be the type of report suggested for studying the relationship between advertising of prescription drugs and subsequent sales of those drugs.
A long technical report would be appropriate in this situation as it provides a comprehensive report of research work with detailed findings, data analysis, and methodology.
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the idea is new which meand doesnot exist in market
have some sustainable operations
If the idea is new, it means it does not exist in the market. To ensure that the business has sustainable operations, it's essential to take certain steps.What is a new idea?A new idea refers to a concept that has never been tried or created before. Such an idea might involve the creation of a new product or service or an invention.
Entrepreneurs and businesses develop new ideas to improve their profitability, market share, and to stay ahead of their competitors.Sustainable operations involve the use of environmentally friendly practices, ethical conduct, and financial stability. Anticipate potential risks and challenges that the business might face and develop contingency plans for them. This could include competition, legal regulations, or the availability of resources. Conduct market research: Market research helps to identify the market needs, customer preferences, and potential gaps in the market. This information is useful when developing products or services that meet customer needs and preferences.Leverage technology: Technology can help businesses to streamline operations, reduce costs, and increase efficiency. It can also help businesses to reach a wider audience through online marketing strategies. Build a strong brand: A strong brand helps to build customer loyalty, trust, and credibility.
The business should focus on building a brand that reflects its values and purpose, and is relatable to its target audience. In summary, a new business idea requires careful planning and execution to ensure sustainable operations. A solid business plan, market research, and leveraging technology can help to create a strong foundation for a new business.
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Use the following information to prepare the June cash budget for Springer Company. It should show expected cash receipts and cash payments for the month and the cash balance expected on June 30. a. Beginning cash balance on June 1 is $52,000. b. Cash receipts from sales are expected to be $1,625,000. c. Cash payments for direct materials and direct labor are expected to be $246,500 and $573,100, respectively. d. Budgeted cash payments for variable overhead is $340,000. e. Budgeted depreciation, the only fixed overhead estimated for June: $24,000. f. Cash selling and administrative expenses budgeted for June are $282,000. g. Bank loan interest due in June: $8,000. i. Loan payment of $50,000 should be made if the preliminary cash balance is greater than $200,000.
The Springer Company cash budget for June is presented in the table below: the total cash balance expected on June 30 would be $203,400.
Cash ReceiptsSales (credit)$1,625,000Total Cash Receipts$1,625,000Cash PaymentsDirect Materials$246,500Direct Labor$573,100Variable Overhead$340,000Fixed Overhead$24,000Selling and Administrative Expenses$282,000Bank Loan Interest$8,000Loan Payment$0
Total Cash Payments$1,473,600Net Cash Inflows$151,400Cash BalanceJune 1$52,000Total Receipts$1,625,000Total Payments$1,473,600Net Inflows$151,400Cash Balance June 30$203,400Loan Payment$0If the preliminary cash balance is greater than $200,000, Springer Company will not make a loan payment in June. Therefore, the total cash balance expected on June 30 would be $203,400.
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Year 1:
165,000 – 63,120 = 101,880 still to recover
Year 2:
101,880 – 70,800 = 31,080 still to recover Year 3: 31,080 – 91,080
= -60,000 project pays back in year 3
Do we
accept or reject the
The calculation of the payback period involves dividing the initial investment by the annual cash flow of the project to determine the amount of time it takes to recoup the investment.
Payback period is an important technique for measuring the risk of an investment. It allows managers to make decisions about whether to accept or reject a project, as well as when the project will begin to generate cash flows. Here, in this case, the calculation of the project payback period is shown below:
Year 1:165,000 – 63,120 = 101,880 still to recover
Year 2:101,880 – 70,800 = 31,080 still to recover
Year 3:31,080 – 91,080 = -60,000
Project pays back in year 3.
The project has a negative payback period, which means that it does not recover the initial investment in the stipulated period, so the project must be rejected as it is not profitable enough.
Based on the calculation of payback period, the project has a negative payback period, which means that it does not recover the initial investment in the stipulated period, so the project must be rejected as it is not profitable enough. The project pays back in year 3. However, the project has not yet paid back the initial investment of $165,000 in three years.The payback period can be used as a quick tool to assess the viability of a project. However, it is not without flaws, as it does not consider the time value of money and future cash flows that occur beyond the payback period. It is just one method of assessing the financial viability of an investment.
Hence, other methods such as net present value (NPV) and internal rate of return (IRR) should be considered when making investment decisions. Based on the calculation of payback period, the project has a negative payback period, which means that it does not recover the initial investment in the stipulated period, so the project must be rejected as it is not profitable enough. The project pays back in year 3. However, the project has not yet paid back the initial investment of $165,000 in three years. The payback period can be used as a quick tool to assess the viability of a project.
However, it is not without flaws, as it does not consider the time value of money and future cash flows that occur beyond the payback period. It is just one method of assessing the financial viability of an investment. Hence, other methods such as net present value (NPV) and internal rate of return (IRR) should be considered when making investment decisions.A negative payback period implies that the project does not provide adequate cash flows to repay the initial investment.
Therefore, the project must be rejected because it does not generate enough cash flows to compensate the investors for their risk. In this case, the project generates negative cash flows for the first two years, indicating that the project is not a good investment. Hence, the project should not be accepted. In conclusion, based on the calculation of payback period, the project should be rejected as it has a negative payback period. Other investment appraisal techniques should also be considered before making any investment decision.
Based on the calculation of payback period, the project should be rejected as it has a negative payback period. Other investment appraisal techniques should also be considered before making any investment decision. A negative payback period implies that the project does not provide adequate cash flows to repay the initial investment. Therefore, the project must be rejected because it does not generate enough cash flows to compensate the investors for their risk. The project generates negative cash flows for the first two years, indicating that the project is not a good investment. Hence, the project should not be accepted.
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to price-discriminate, a firm should charge a higher price to customers with demand as compared to other consumers of this good.
To engage in price discrimination, a firm should charge a higher price to customers with higher demand compared to other consumers of the same good.
Price discrimination is a strategy used by firms to maximize their profits by charging different prices to different customers based on their willingness to pay. By identifying segments of customers with different levels of demand or price sensitivity, firms can tailor their pricing strategies to extract higher prices from those willing to pay more.
Price discrimination is effective when a firm has the ability to distinguish between customers' willingness to pay and prevent arbitrage, where customers who are charged lower prices resell the product to those who would have paid higher prices. By charging a higher price to customers with higher demand, the firm can capture a larger portion of the consumer surplus, which represents the difference between the maximum price a customer is willing to pay and the actual price they pay.
This pricing strategy allows the firm to capture additional revenue and increase its profitability. However, it is important for firms to carefully analyze market conditions, customer segments, and potential legal and ethical implications when implementing price discrimination strategies to ensure they are in compliance with relevant regulations and maintain positive customer relationships.
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Answer the following question . All are related.
(b) What are the five C's of credit? How does a banker in Bangladesh use them when evaluating a loan request?
(c) Why is it so difficult for most small business owners to raise capital needed to start, operates or expand their ventures?
(b) The five C's of credit are Character, Capacity, Capital, Collateral, and Conditions. When evaluating a loan request, a banker in Bangladesh uses these factors to assess the creditworthiness and risk associated with the borrower. They consider the borrower's character, such as their reputation, integrity, and willingness to repay the loan. Capacity refers to the borrower's ability to repay the loan based on their income, financial stability, and existing debts.
Capital examines the borrower's financial resources and investment in the business. Collateral assesses the assets that can be used as security for the loan. Conditions refer to the external factors that may impact the borrower's ability to repay, such as economic conditions or industry trends. By analyzing these factors, the banker can make an informed decision regarding the loan request.
(c) Small business owners often face challenges in raising capital needed to start, operate, or expand their ventures due to several reasons. Firstly, small businesses may lack a substantial financial track record or collateral, making it difficult for them to secure traditional loans from banks or financial institutions. They may also face higher interest rates or stringent borrowing requirements, limiting their access to capital. Additionally, small businesses may struggle to demonstrate their ability to generate consistent cash flows, which can create uncertainty for lenders.
Moreover, the risk associated with small businesses is often perceived as higher compared to larger, established companies, leading to reluctance from lenders to extend credit. Limited knowledge of alternative financing options and lack of networks or connections to potential investors can further restrict access to capital. These factors collectively contribute to the difficulty faced by most small business owners in raising the necessary funds to start, operate, or expand their ventures.
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An increase in domestic income leads to (1) A decrease in the real exchange rate leads to (2) There is (3) There is (4) (1) no change an increase a decrease in imports. in imports. correlation between foreign income and exports. between the real exchange rate and exports. (2) (3) a negative a decrease no change no O an increase a positive (4) a positive correlation no correlation O a negative correlation
An increase in domestic income leads to (2) a decrease in the real exchange rate. There is (3) a correlation between foreign income and exports. There is (4) a positive correlation between the real exchange rate and exports. An increase in domestic income leads to (1) an increase in imports.
An increase in domestic income, ceteris paribus, will lead to an increase in the demand for goods and services both domestically and internationally. This increase in demand will also lead to a higher price level, as businesses adjust to meet the growing demand for their goods and services. The increase in price level will lead to a decrease in the real exchange rate. A lower real exchange rate makes exports more attractive to international consumers, leading to an increase in exports. Therefore, there is a positive correlation between the real exchange rate and exports. However, an increase in domestic income will also lead to an increase in imports, as domestic consumers will demand more goods and services that are not produced domestically. There is, therefore, a negative correlation between domestic income and imports. Finally, there is a correlation between foreign income and exports. As foreign income increases, foreign consumers will have a higher demand for exports, which will increase exports in the domestic economy.
An increase in domestic income has a complex relationship with the real exchange rate, imports, and exports. While an increase in domestic income will lead to a decrease in the real exchange rate and an increase in exports, it will also lead to an increase in imports. Additionally, foreign income has a positive correlation with exports.
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Fermoy Ltd, an ASX listed entity, intends to make a public issue of $50m of debentures. Required: Explain the meaning of the term ‘debentures’, and the legal disclosure requirements that apply to the proposed fundraising.
Australian law
Debentures are an investment instrument that enables investors to lend money to a corporation in exchange for a fixed rate of interest.
This allows investors to receive a regular return on their investment in return for providing a corporation with a loan of capital. The term "debenture" is often used interchangeably with "bond" in the United States. It is important to note that debentures are not secured by assets, and investors are reliant on the issuer's creditworthiness to receive their interest payments and repayments of principal.
The disclosure requirements that apply to Fermoy Ltd's proposed fundraising are determined by Australian law.A prospectus must be prepared and distributed to potential investors in accordance with the Corporations Act 2001 (Cth) if the debenture issue is marketed to the public. This prospectus must include the following information:The risks associated with the investment in debentures, The expected yield, The potential tax implications, Any fees that may be deducted from the investment, Any terms and conditions that apply to the debentures, Information about the issuer's financial situation, including its financial statements.
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Discussion Initial Response Due by Wednesday: It is payday! You look at your pay stub and realize you received a $4,500 bonus. What do you plan to do with your windfall? You have three choices: (1) buy a bond, (2) pay off a loan, or (3) loan the money to family. Using the present value charts in this link (lump sum) and this link (annuity), calculate present value of the three options. Do not forget to show your work. Discuss which option you would choose and why. Consider financial and non-financial influences. There are no right or wrong answers: simply support your decision. Discussion Response Due by Saturday: Respond to another student. Option Information Present Value Formula PV Answer Calculate the present value of investing in a start-up company if you expect to receive $5,000 in 4 Example years and the annual market rate is 6%. Remember to use the Present Value factor in your calculation. $5,000 X.79209 $3,960.45 #1 Pay $4,500 for a bond. The bond pays $5,000 at the end of 2 years with a 10% coupon (interest) paid semi-annually (every 6 months). What is the present value of the bond? Is this a good deal since you are paying $4,500? #2 Pay off a loan. The loan is due at the end of 2 years (balloon loan). It has a balance of $5,500 and an interest rate of 12% that accrues semi-annually. The bank said they will take the present value of the loan. Do you have enough money to pay off the loan? # 3 Lend money to your family for a home renovation. They will pay you $5,000 at the end of the 2 years. Is this a good deal if the annual market rate is 6%?
The interest paid on a financial instrument, such as a bond or loan, twice a year is referred to as a semi-annual interest payment.
Semi-annual interest payment (Pmt) = FV × r = $5,000 × 5% = $250. Semi-annual discount rate (i) = 10%/2 = 5%. To calculate the present value of an annuity, we use the following formula: PV of Annuity = Pmt × [(1 - (1 + i)^-n) / i] Here, Pmt = $250i = 5% (semi-annual) n = 4. Using the above formula, we get: PV of Annuity = $250 × [(1 - (1 + 5%)^-4) / 5%] = $961.54. To calculate the present value of the face value, we use the following formula: PV of Face Value = FV / (1 + i)n= $5,000 / (1 + 5%)^4= $4,169.87. Hence, the Present value of the bond is equal to the sum of the present value of the annuity and the present value of the face value= is $961.54 + $4,169.87= $5,131.41
Yes, this is a good deal since the present value of the bond is greater than the cost of the bond i.e. $4,500.#2 Pay off a loan. The loan is due at the end of 2 years (balloon loan). It has a balance of $5,500 and an interest rate of 12% that accrues semi-annually. The bank said they will take the present value of the loan.
Given, Balance (FV) = $5,500Semi-annual interest rate (i) = 12%/2 = 6%Period (n) = 2 years = 4 semiannual periods. To calculate the present value of a lump sum, we use the following formula: PV = FV / (1 + i)n. using the above formula, we get: PV = $5,500 / (1 + 6%)^4= $3,868.14. Since the present value of the loan is less than $4,500, you have enough money to pay off the loan.#3 Lend money to your family for a home renovation.
Given, FV = $5,000n = 2 years i = 6%. To calculate the present value of a lump sum, we use the following formula: PV = FV / (1 + i)n. Using the above formula, we get PV = $5,000 / (1 + 6%)^2= $4,499.88. Since the present value of face value is less than $4,500, it is not a good deal to lend money to your family for a home renovation at an annual market rate of 6%.
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Time left 1:12:23 Quiz ne SECT CHO "Price is the only element of the marketing mix that earns revenue for the firm and so it is important to take due care when setting prices. Assume you are operating OML International Shipping Company Limited Using the statement above outline five factors that you should take into consideration when setting the price to quote for a shipment. (10 marks) 1 10 | 11 1920 28 A- В І IEE 37 SECT a
When setting prices for a shipment, OML International Shipping Company Limited should consider five factors: competition, costs, customer value, market demand, and pricing objectives.
Setting the right price is crucial for OML International Shipping Company Limited as it directly affects revenue. Five factors that should be considered when determining the price for a shipment are:
Competition: OML should assess the pricing strategies of competitors to ensure their prices remain competitive in the market. They need to consider how their prices compare to those of similar shipping companies and adjust accordingly.
Costs: OML should calculate all costs associated with providing the shipping service, including labor, fuel, maintenance, and administrative expenses. These costs should be taken into account to ensure that prices cover expenses and generate a reasonable profit margin.
Customer value: OML should consider the perceived value of their shipping services from the customer's perspective. They should assess the unique features, reliability, and convenience they offer compared to competitors and set prices that reflect the value customers receive.
Market demand: OML needs to analyze market demand for shipping services. If demand is high, they might consider setting higher prices. However, if demand is low, they may need to adjust prices to attract customers and remain competitive.
Pricing objectives: OML should establish pricing objectives aligned with their overall business goals. These objectives could include maximizing market share, increasing profitability, or positioning themselves as a premium shipping provider. The chosen objectives will guide the pricing strategy and influence the prices set.
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Singing Fish Fine Foods is considering two potential projects for the funds. Each will cost $2,000,000 for capital investments. Project 1 is updating
the deli section of the store for additional food service. The estimated annual after-tax
cash flow of this project is $600,000 per year for the next five years. Project 2 is
updating the store’s wine section. The estimated annual after-tax cash flow for this
project is $530,000 for the next six years. The appropriate discount rate for the deli
expansion is 9.5% and the appropriate discount rate for the wine section is 9.0%. If the two projects are independent, use
the NPV to determine which project(s) Singing Fish should choose for the store.
2. For each project, adjust the NPV for unequal lives with the equivalent annual annuity. Enter the highest equivalent annuity payment.
Singing Fish Fine Foods has two projects: Project 1, updating the deli section with an estimated annual after-tax cash flow of $600,000 for five years, and Project 2, updating the wine section with an estimated annual after-tax cash flow of $530,000 for six years.
The appropriate discount rates for the projects are 9.5% and 9.0% respectively. To determine which project(s) Singing Fish should choose, we will calculate the net present value (NPV) for each project and adjust it for unequal lives using the equivalent annual annuity.
Calculate NPV for each project:
For Project 1, using a discount rate of 9.5%, we calculate the NPV by discounting the annual cash flows:
NPV1 = ($600,000 / (1 + 0.095)^1) + ($600,000 / (1 + 0.095)^2) + ... + ($600,000 / (1 + 0.095)^5) - $2,000,000
For Project 2, using a discount rate of 9.0%, we calculate the NPV:
NPV2 = ($530,000 / (1 + 0.09)^1) + ($530,000 / (1 + 0.09)^2) + ... + ($530,000 / (1 + 0.09)^6) - $2,000,000
Adjust NPV for unequal lives with the equivalent annual annuity:
To compare projects with different durations, we can convert the NPV into an equivalent annual annuity payment. This annuity represents a uniform cash flow over the project's life.
For each project, calculate the equivalent annual annuity using the NPV and the appropriate discount rate.
Compare the equivalent annuity payments:
Compare the equivalent annuity payments for both projects. The project with the highest equivalent annuity payment would be the preferred choice for Singing Fish Fine Foods.
By comparing the NPVs and equivalent annuity payments of both projects, Singing Fish Fine Foods can determine which project would provide the most favorable financial outcome and choose the project accordingly.
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you earn $2,000 salary in May, but only deposit your payment in June because you have been out of town. your net worth will: select one: a. decrease in May because you did not deposit the payment. b. Increase in July after your deposit clears. c. Increase in June when you deposit it. d. Increase in May when you earned it. Question 5 (1 mark). If the value of owner's equity is initially $10,000, calculate the value of owner's equity after the following transactions: cash revenues $9,000, prepay rent $3,000, pay bank loan principal $2,000, pay maintenance fees $4,000 and buy a computer on account for $1,000. Select one: a. $13,000 b. $11,000 C. $15,000 d. $9,000 Question 6 (1 mark). A transaction that involves the balance sheet does not always impact net worth. Select one: a. False b. Depends on the value c. True d. Depends on the accounting policy Question 7 (1 mark). Accrual-based accounting means: Select one: a. expenses and revenues are recorded in the same period as they are incurred and earned b. assets are equal to liabilities c. assets and liabilities are recorded in the same period d. an increase in cash equals an increase in net worth
The reason behind this is because when you earned the $2,000 salary in May, you had not deposited the payment. But when you deposit the payment in June, your net worth increases by $2,000.
Cash Revenues = $9,000Expenses = Prepay Rent ($3,000) + Pay Bank Loan Principal ($2,000) + Pay Maintenance Fees ($4,000) + Buy a computer on account for ($1,000) = $10,000Owner's Equity = $10,000 + $9,000 - $10,000 = $9,000
FalseA transaction that involves the balance sheet always impacts net worth because the balance sheet .
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Study Problem 4-9 (algo) Table below shows the demand for haircuts from seniors and other customers on an average weekday in the local hairdressing shop. Quantity Demanded by Quantity Demanded by Seniors Price of Haircut Other Customers $22 3 7 20 8 18 16 12 10 14 15 11 12 18 12 10 21 13 24 14 27 15 4 30 16 a) Between the prices of $18 and $22, which of the two demands is more elastic? Round your answers to 2 decimal places. The price elasticity of demand for seniors is The price elasticity of demand for other customers is 8 6 6 9 K Help Save & Exit Quantity Demanded by Seniors Quantity Demanded by Other Customers 3 7 6 8 9 9 12 10 15 11 18 12 21 13 8 24 14 6 27 15 4 30 16 a) Between the prices of $18 and $22, which of the two demands is more elastic? Round your answers to 2 decimal places. The price elasticity of demand for seniors is The price elasticity of demand for other customers is The elasticity of demand is greater for [(Click to select) b) What price would give the shop the greatest sales revenue? 4 Price of Haircut $22 20 18 16 14 12 10 Si
The elasticity of demand is the same for both groups within the given price range. To determine which demand is more elastic between seniors and other customers, we need to calculate the price elasticity of demand for both groups within the given price range of $18 and $22.
The price elasticity of demand is calculated using the formula:
Price Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
For seniors:
Quantity Demanded at $18 = 12
Quantity Demanded at $22 = 8
Percentage Change in Quantity Demanded = ((8 - 12) / 12) * 100% = -33.33%
Percentage Change in Price = (($22 - $18) / $18) * 100% = 22.22%
Price Elasticity of Demand for Seniors = (-33.33% / 22.22%) ≈ -1.50
For other customers:
Quantity Demanded at $18 = 15
Quantity Demanded at $22 = 10
Percentage Change in Quantity Demanded = ((10 - 15) / 15) * 100% = -33.33%
Percentage Change in Price = (($22 - $18) / $18) * 100% = 22.22%
Price Elasticity of Demand for Other Customers = (-33.33% / 22.22%) ≈ -1.50
Both the price elasticities of demand for seniors and other customers are approximately -1.50.
Therefore, the elasticity of demand is the same for both groups within the given price range.
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.The formula for determining the predetermined manufacturing overhead rate is:
A. Budgeted Manufacturing Overhead/Budgeted Cost Driver
B. Budgeted Direct Materials/Budgeted Direct Labor
C. Budgeted Manufacturing Overhead/Budgeted Conversion
D. Budgeted Cost Driver/Budgeted Manufacturing Overhead
The formula for determining the predetermined manufacturing overhead rate is: C. Budgeted Manufacturing Overhead/Budgeted Conversion
The predetermined manufacturing overhead rate is used to allocate manufacturing overhead costs to individual products or jobs based on a predetermined rate per unit of a cost driver. The cost driver is typically a measure of the activity that drives manufacturing overhead costs, such as direct labor hours, machine hours, or direct labor cost.
To calculate the predetermined manufacturing overhead rate, the budgeted manufacturing overhead costs for a specific period are divided by the budgeted level of the cost driver. The cost driver is often expressed in terms of labor hours or machine hours.
By using the predetermined manufacturing overhead rate, companies can allocate manufacturing overhead costs to products or jobs in a more accurate and systematic manner, allowing for better cost control and decision-making.
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In our discussion of the biochemical cycles of some of the major elements on Earth, we saw various interaction among biological, geological and chemical processes. Explain how the hydrologic, carbon, nitrogen and phosphorus cycles work and how humans have impacted each cycle, leading to changes on Earth. Provide specific examples.
Biochemical cycles of some major elements such as water, carbon, nitrogen and phosphorus occur in the earth and play significant roles.
Hydrologic cycle The hydrologic cycle is the process by which water circulates through the earth’s ecosystems. It involves the evaporation of water from the ocean and other water bodies. The water vapor rises to the atmosphere where it cools and condenses to form clouds. The clouds eventually produce precipitation in the form of rain or snow. The water then runs off to form streams, rivers, lakes, and other water bodies.
Humans have impacted this cycle by diverting water sources, polluting water bodies, and causing changes in the amount of land covered by vegetation. For example, deforestation and urbanization have decreased the amount of land covered by vegetation, leading to a reduction in the amount of water that gets absorbed by the soil.
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the labor market is in equilibrium when:
group of answer choices
a.the labor demand curve lies above the labor supply curve.
b.both labor demand and labor supply curves are positively sloped.
c.both labor demand and labor supply curves are negatively sloped.
d.the labor demand curve intersects the labor supply curve.
e.the labor demand curve is negatively sloped but the labor supply curve is positively sloped.
The correct option is option (d) the labor demand curve intersects the labor supply curve. Equilibrium can be defined as a state where all the involved parties are satisfied. In economics, the equilibrium point is where the quantity demanded is equal to the quantity supplied.
The intersection of labor demand and labor supply curves determines the equilibrium wage rate. At this point, the labor market is said to be in equilibrium. The quantity of labor supplied and demanded at this point is the same and the wage rate is satisfactory to both employers and employees.In contrast, if the wage rate is below the equilibrium rate, the demand for labor would increase and the supply of labor would decrease, resulting in a labor shortage. Similarly, if the wage rate is higher than the equilibrium rate, the supply of labor would increase while the demand for labor would decrease, resulting in a labor surplus. This can be shown graphically as below: Therefore, the equilibrium point is a very important concept in labor economics and helps in the effective allocation of resources to achieve maximum efficiency.
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Transfer payments are income that is
a. earned but not received.
b. received but not spent.
c. spent but not earned.
d. received but not earned.
Transfer payments are income that is The correct option is d) received but not earned.
Transfer payments are the income received by individuals or groups of people for which they do not have to give any current services. It is a type of welfare payment that does not involve goods or services being exchanged. The government is usually responsible for making transfer payments to individuals or groups who may not be able to support themselves, such as the elderly, the unemployed, or the disabled.
Transfer payments are intended to assist the less fortunate members of society in meeting their basic needs. The goal is to reduce poverty and inequality by providing a safety net for people who are unable to support themselves through employment or other means. Thus, transfer payments are received but not earned.
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EJS is 35% financed by risk-free debt and 65% equity. The treasury bill rate is 3%, the expected market return is 15% and the beta of stock is 1.6. The tax rate is 30%. The firm is considering a project that is equally as risky as the overall firm. The project has an initial cash outflow of $1.5 million and annual cash inflows of $500 000 at the end of each year for 5 years. What is the NPV of the project?
To calculate the Net Present Value (NPV) of the project, we need to discount the cash inflows and outflows using the appropriate discount rate. In this case, the appropriate discount rate is the weighted average cost of capital (WACC).
First, let's calculate the WACC using the given information:
Debt Financing: 35%
Equity Financing: 65%
Risk-Free Debt Rate: 3%
Expected Market Return: 15%
Beta of Stock: 1.6
Tax Rate: 30%
WACC = (Debt/Total Financing) * After-tax Cost of Debt + (Equity/Total Financing) * Cost of Equity
Cost of Debt = Risk-Free Debt Rate * (1 - Tax Rate)
Cost of Equity = Risk-Free Debt Rate + (Beta * (Expected Market Return - Risk-Free Debt Rate))
WACC = (0.35) * [3% * (1 - 30%)] + (0.65) * [3% + (1.6 * (15% - 3%))]
Now, let's calculate the NPV of the project using the WACC as the discount rate:
Initial Cash Outflow: -$1.5 million
Annual Cash Inflows: $500,000 (end of each year) for 5 years
NPV = Sum of [Cash Inflow / (1 + WACC)^t] - Initial Cash Outflow
NPV = [$500,000 / (1 + WACC)^1] + [$500,000 / (1 + WACC)^2] + [$500,000 / (1 + WACC)^3] + [$500,000 / (1 + WACC)^4] + [$500,000 / (1 + WACC)^5] - $1.5 million
By calculating this expression, we can determine the NPV of the project.
Please note that the WACC calculated here assumes that the project has the same risk as the overall firm. Adjustments may be necessary if the project's risk differs significantly.
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Sara is the CEO of Magshop, under her leadership the organisation was able to acquire their competitor Conde Nast publication. Identify and discuss what approaches she can implement to strengthen the Magshop corporate culture and change the acquired organisational culture to fit with Magshop’s mission and vision.
To strengthen the Magshop corporate culture and align the acquired organizational culture with Magshop's mission and vision, Sara, the CEO, can implement several approaches:
Communicate the mission and vision: Sara should clearly articulate Magshop's mission and vision to all employees, emphasizing the values and goals that the company stands for. This communication should be consistent and ongoing, reinforcing the desired culture throughout the organization.
Lead by example: As the CEO, Sara's actions and behaviors should align with the desired corporate culture. She should model the values and behaviors that she expects from employees, demonstrating the importance of the desired culture and setting the tone for the organization.
Employee involvement and empowerment: Sara can involve employees in shaping the corporate culture by encouraging their input and participation. This can be done through team meetings, surveys, and open forums where employees can share their perspectives and contribute to defining the desired culture. Additionally, empowering employees by giving them autonomy and decision-making authority fosters ownership and commitment to the new culture.
Training and development: To support the cultural change, Sara can invest in training and development programs that focus on the desired values and behaviors. This can include leadership development programs, workshops on teamwork and collaboration, and training sessions on the company's mission and vision. These initiatives will help employees understand and embrace the new culture.
Integration activities: Sara should facilitate integration activities between Magshop and the acquired organization. This can involve cross-functional collaboration, joint projects, and team-building exercises to promote mutual understanding and relationship-building. These activities will help bridge the cultural gap and create a sense of unity and shared purpose.
Recognition and rewards: Sara can implement recognition and reward programs that reinforce and celebrate the desired culture. Recognizing employees who demonstrate the desired values and behaviors, and linking rewards to the alignment with the company's mission and vision, will motivate employees and reinforce the importance of the new culture.
Continuous evaluation and feedback: It is essential for Sara to continuously evaluate the progress of the cultural change and seek feedback from employees. This can be done through surveys, focus groups, and regular performance evaluations. By actively listening to employees' experiences and addressing their concerns, Sara can make adjustments and ensure that the cultural change is on the right track.
By implementing these approaches, Sara can create a strong corporate culture at Magshop while successfully integrating and aligning the acquired organization's culture with Magshop's mission and vision. It requires consistent effort, communication, and engagement from both leadership and employees to drive and sustain the desired cultural transformation. To strengthen the Magshop corporate culture and align the acquired organizational culture with Magshop's mission and vision, Sara, the CEO, can implement several approaches:
Communicate the mission and vision: Sara should clearly articulate Magshop's mission and vision to all employees, emphasizing the values and goals that the company stands for. This communication should be consistent and ongoing, reinforcing the desired culture throughout the organization.
Lead by example: As the CEO, Sara's actions and behaviors should align with the desired corporate culture. She should model the values and behaviors that she expects from employees, demonstrating the importance of the desired culture and setting the tone for the organization.
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31. Wall & Co. hired Carr to work as an agent in its collection department, reporting to the credit manager. Which of the following is correct?
a. Carr does not owe a fiduciary duty to Wall since he does not compete with the company
b. Carr will be personally liable for any torts he commits even though they are committed in the course of his employment and pursuant to Wall’s directions.
c. Carr has the impelled authority to engage counsel and commence legal action against Wall’s debtors.
d. Carr may commingle funds collected by him if this is convenient as long as he keeps proper records
Wall & Co. hired Carr to work as an agent in its collection department, reporting to the credit manager. The correct option is letter b. Carr will be personally liable for any torts he commits even though they are committed in the course of his employment and pursuant to Wall’s directions.
What is an agent?An agent is a person who acts on behalf of another person and has the authority to bind that person in the context of transactions affecting third parties. An agent can be an employee of a company that acts on behalf of his employer, and the employer is liable for any wrongful act of the employee if the employee was acting in the scope of his employment. However, the employee/agent is personally liable for any torts he/she commits, even if committed in the course of his/her employment and pursuant to the employer’s direction. A tort is an injury to another person’s person or property that can result in liability.The fiduciary duty arises when the agent is given authority by the principal to manage the principal's property or affairs. The fiduciary duty is a relationship that is based on trust and confidence, and it requires the agent to act in the best interests of the principal. The agent has a duty to avoid conflicts of interest, to avoid self-dealing, to disclose material information to the principal, and to maintain proper accounts and records. The duty is a high standard of conduct that requires the agent to be loyal, faithful, and honest with the principal.Carr does not have the impelled authority to engage counsel and commence legal action against Wall’s debtors. Carr is an agent of Wall and does not have the authority to act against Wall's interests. Carr has a duty to act in the best interests of Wall and not to act in his own interests. Carr may not commingle funds collected by him if this is convenient as long as he keeps proper records. An agent must keep the principal’s funds separate from his own funds, and the agent must account for the principal’s funds. In conclusion, Carr will be personally liable for any torts he commits even though they are committed in the course of his employment and pursuant to Wall’s directions.
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Explain the differences between a sales forecast and an operating budget.
The sales forecast and operating budget is both important tools for financial planning. While the sales forecast is used to predict revenue, the operating budget is used to manage expenses.
Sales forecasts and operating budgets are two financial planning tools used by businesses. Both are essential to the success of the company. However, there are differences between the two. A sales forecast is an estimate of future sales within a given period. The sales forecast helps businesses to anticipate future demand and to plan accordingly. A sales forecast is an estimate of revenue. It also determines the number of products the company needs to sell to achieve the desired profit. An operating budget is a detailed plan that outlines how a company will spend its financial resources. The budget includes operating expenses such as rent, salaries, and utilities. The operating budget is used to determine whether a company can meet its financial obligations, how much money it needs to borrow, and how much money it has available to invest in new projects.
The main differences between a sales forecast and an operating budget are: A sales forecast is an estimate of future sales while an operating budget is a plan for managing expensesSales forecast focuses on sales, while the operating budget focuses on expenses. The sales forecast is prepared before the operating budget. The sales forecast is based on estimates while the operating budget is based on real dataSales forecast is used for strategic planning while the operating budget is used for day-to-day decision making. The sales forecast is used to predict sales volume and revenue, while the operating budget is used to determine the allocation of funds to different departments. Overall, the sales forecast and operating budget are both important tools for financial planning. While the sales forecast is used to predict revenue, the operating budget is used to manage expenses.
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A $4,000 machine is purchased by paying $1,000 cash and issuing a promissory note for the remainder. The journal entry should include a. credit to machinery b. credit to notes payable C. credit to notes receivable D. debit to cash
Option D is correct i.e., the journal entry will include a debit to cash.In this scenario, the purchase of a machine costing $4,000 was done through payment of $1,000 cash and issuance of a promissory note for the balance.
The journal entry for this transaction will involve the following accounts:a) Debit to machineryb) Credit to cash (for $1,000)c) Credit to notes payable (for $3,000)Therefore, option D is correct i.e., the journal entry will include a debit to cash.Here's a brief explanation of the accounts involved:Cash: This asset account decreases as $1,000 is paid to the seller of the machinery.Machinery: This asset account increases as the machinery worth $4,000 is purchased with $1,000 in cash and the remaining $3,000 in the form of a promissory note.Notes Payable: This is a liability account which records the amount owed to the seller of the machinery and is credited with $3,000 as a result of the issuance of the promissory note
Note that notes receivable refers to the amount owed to a company by its customers and is not relevant to this transaction.
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a) Who are the two economic decision-makers discussed in Week 1 and what do they attempt to maximize (what are their primary goals)? b) Provide real-world examples of the two economic decision-makers and discuss how they attempt to maximize whatever it is that they maximize.
a) The two economic decision-makers discussed in Week 1 are households and firms. b) In the real world, households can be seen as consumers who make decisions on what goods and services to purchase based on their preferences and budget constraints,
a) The two economic decision-makers discussed in Week 1 are households and firms. Households, representing individuals or families, attempt to maximize their utility or satisfaction from consuming goods and services. Firms, on the other hand, attempt to maximize their profits, which is the difference between their total revenue and total costs.
b) In the real world, households can be seen as consumers who make decisions on what goods and services to purchase based on their preferences and budget constraints. For example, a household may prioritize spending on housing, education, and healthcare to maximize their overall well-being.
Firms, on the other hand, are entities engaged in production and aim to maximize their profits. An example of a firm would be a manufacturing company that seeks to optimize its production processes, minimize costs, and sell products at a price that generates the highest revenue. By maximizing profits, firms can ensure their long-term sustainability and growth.
Both households and firms play crucial roles in the economy as they interact in markets, shaping the allocation of resources and driving economic activity. Their decision-making processes and goals have significant implications for market dynamics, resource allocation, and overall economic welfare.
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Due to the severity of COVID 19 on households, the government of Australia announced Job Keeper Allowances to be given to the labour force that had lost employment.
a. Examine the impact of Job Keeper Allowances during the COVID 19 recession on Australia’s economy. (4 Marks)
ANSWER a):
b. Examine two reasons that could explain why the government of Australia terminated Job Keeper Allowances though COVID 19 still impacted Australia. (3 Marks)
ANSWER b):
c. Assume the government of Australia spent AUD50 billion on allowances given to Job Keeper beneficiaries. Assume that despite the family financial stress, 15% of the Job Keeper Allowances was the total beneficiary savings. Further, assume all other factors remain constant. Calculate the total effect of the Australian government Job Keeper Allowance spending on aggregate demand for the economy. (4 Marks)
a) The Job Keeper Allowances implemented by the government of Australia during the COVID-19 recession had an impact on the economy. b) The termination of Job Keeper Allowances despite the ongoing impact of COVID-19 can be attributed to two possible reasons. The government might have assessed that the economic situation had improved sufficiently and the government might have considered the fiscal implications of the program.
c) The total effect on aggregate demand would be a net increase of AUD 42.5 billion in aggregate demand.
a) The Job Keeper Allowances implemented by the Australian government during the COVID-19 recession had a positive impact on the economy. These allowances provided financial support to the labor force that had lost employment, helping to stabilize household incomes and mitigate the negative effects of job losses.
The allowances injected additional funds into the economy, supporting consumption and aggregate demand. This helped to prevent a sharper decline in economic activity and contributed to the overall recovery of the Australian economy during the recession.
b) The government of Australia terminated Job Keeper Allowances despite the ongoing impact of COVID-19 due to two possible reasons.
Firstly, the government might have assessed that the economic situation had improved sufficiently, and the labor market was recovering, reducing the need for continued support.
Secondly, the government might have considered the fiscal implications of the program, as the substantial spending on allowances increased the budget deficit. The termination of the allowances could be seen as a measure to contain government spending and address long-term fiscal sustainability concerns.
c) Assuming the government spent AUD 50 billion on Job Keeper Allowances and 15% of the allowances were saved by the beneficiaries, the total effect on aggregate demand can be calculated. The savings of 15% (AUD 7.5 billion) would reduce the immediate impact on consumption and aggregate demand.
However, the remaining 85% (AUD 42.5 billion) of the allowances would be spent by the beneficiaries, leading to an increase in consumption expenditure. This increase in consumption would have a multiplier effect on the economy, as it stimulates demand for goods and services, leading to increased production and income.
The total effect on aggregate demand would be the initial government spending of AUD 50 billion minus the savings rate of AUD 7.5 billion, resulting in a net increase of AUD 42.5 billion in aggregate demand.
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