• Would need to reduce working capital by $260M • Would need to increase gross margins by 328bps • If growth is so important, then a price raise would likely slow that. The DPO change needed to self-finance is likely too aggressive. I would try to get half through DPO improvements and the other half through debt. This roughly doubles their debt. (But
2. Explain why you would be more or less willing to buy a house under the following circumstances: e. You just inherited $100,000. More because your wealth has increased f. Real estate commissions fall from 6% of the sales price to 4% of the sales price. More because it has become more liquid g. You expect Polaroid stock to double in value next year. Less because its expected return relative to other investments has reduced h. You expect housing prices to fall.
Consumers would normally spend on the higher utility and in this instance that product is product A. However, the more customers purchase product A, the extra satisfaction will decrease and the utility of B will increase since you will now hardly have a demand for it. Equilibrium will be restored as one utility goes up, the other one goes down. Let us assume the income of the consumer goes up by 5%, this will mean: Income =$100 + $5 = $105.00 Product A $ 5.00 per unit Product B $11.00 per unit With an income of $ 105.00 a consumer can purchase 21 units of product A and 9 units of product B (yellow line) There was an increase in purchasing power for the consumer, however because the price of A was lower, the consumer substituted, since the price of B increased the extra money will go to this product, thus maintaining the same bundle, and an equilibrium state will continue to remain. 2|Page Question 3 ISOQUANTS In Figure 3.0 although points A, B, and C all involve different combinations of capital and labor, output is equal to Q0 with each of these combinations.
But in the meanwhile smaller competitors started to quickly erode market share with prices cut. In 1997, instead of cutting prices, UST reacted to the growth of this value players with the introduction of premiumRed Seal but it was late considering that other brands were already successful in this segment. Moreover, UST is over dependent on smokeless tobacco business that contributed in 1998 for about 97% of
After discussing the pricing problem, Magers want to keep the 100 series price for $2.45, which is right. Even though the sales volume would increase to 1,000,000 from 750,000 by reducing the selling price from $2.45 to $2.25 per 100 pieces, the company would not make profit. Since the cost per 100 pieces for 100 series is $2.29, which bigger than $2.25. If the company sold at $2.25, the company lost money. Also, in the short run,
The opposite occurs for a balance of payments surplus. However, the extent to which this occurs depends on the price elasticity of demand for exports and imports on the Marshall Lerner Condition. This condition states that devaluation (a fall in the value of the currency) will lead to an improvement on the current balance will be seen if the combined elasticities of demand for exports and imports are greater than 1. The size of any J-curve affect in the short run will also affect this extent. The J-curve effect is a short term
The LM Curve will see a shift to the left and decrease the value of "Y" if the IR is higher than the ER of the market. The GDP is increasing in value and there will be an increase of savings.. If the IR was below the equilibrium, the opposite of the previously stated would occur. The LM Curve would see a shift to the right, therefore increasing the value of "Y". The GDP value would then decrease, due to the move from Point A to C, and increase employment which would decrease savings.
Another different objective a firm could have could be to revenue maximise. Revenue maximisation occurs when marginal revenue equals zero (MR=0). At this point revenue is being maximised as every unit produced until marginal revenue equal 0 is adding a certain amount of extra revenue to the total revenue. After the point MR=0 every extra unit produced has a negative value of marginal revenue therefore each unit produced after MR=0 will decrease total revenue and if a firms total revenue decrease their profits may
Autumn Assignment- Demand and Price Elasticity of Demand Part A Price elasticity of demand is a measure of the sensitivity of demand for a product to changes in its price. (Evan Davis et.al. 2003) An elastic demand means that the quantity demanded is responsive to changes in price; inelastic meaning that the quantity demanded is unresponsive to changes in price. PED can be measured by dividing the percentage change in quantity demanded by the percentage change in price. There are a number of factors effecting price elasticity of demand, the overriding determinant being the availability of substitute goods to the consumer, the more that are made available, the higher the elasticity is likely to be as buyers can easily switch from one product to another.