importance of price theory

Government fixes the minimum prices of farm products because the demand for farm products is inelastic. This paradox of poverty is the basis of regulation and control of farm products prices. While APT is more flexible than the CAPM, it is more complex. the mandate to maintain price stability. For example, we will not discuss cooperative game theory, in which participants form coalitions to explicitly coordinate their prices (in many countries, such coalitions would be illegal). Fact Check: What Power Does the President Really Have Over State Governors? The structure arises because the consumer’s choice sets sets are assumed to be defined by certain prices and the consumer’s income or wealth. The government can impose higher taxes and collect more revenue if the demand for the commodity on which a tax is to be levied is inelastic. This helps the trade unions in knowing that where they can easily get the wage rate increased. These premises are products of the system’s ideological hegemony, and they lead to spontaneous total identification with the system. APT factors are the systematic risk that cannot be reduced by the diversification of an investment portfolio. Therefore, the organization is supposed to sell commodities at lower prices than charged by shopkeepers in the other bazars. Welcome to Shareyouressays.com! Therefore, knowledge of elasticity of demand may help the businessman to make a decision whether to cut or increase the price of his product or to shift the burden of any additional cost of production on to the consumers by charging high price. Beta is a measure of the volatility, or systematic risk, of a security or portfolio in comparison to the market as a whole. The price of a joint supply product is fixed high if its demand is inelastic and low price is fixed for that joint supply product whose demand is elastic. Will 5G Impact Our Cell Phone Plans (or Our Health?! It represents what percentage of sales has turned into profits. However, four or five factors will usually explain most of a security's return. The goods that are produced by a single production process are joint supply products. The nationalization of public utility services can also be justified with the help of elasticity of demand. The cost of production of these goods is also joint. The sale of such products can be increased with a little reduction in their prices. To what extent a producer can shift the burden of indirect tax to the buyers by increasing price of his product depends upon the degree of elasticity of demand. The products having more elastic demand are preferred by the businessmen. Exceptionally good harvest brings poverty to the farmers and this situation is called ‘Paradox of Poverty’. If the demand is inelastic the larger part of the indirect tax can be shifted upon buyers by increasing price. As a result of increased demand the production will also increase and more workers will be employed. The macroeconomic factors that have proven most reliable as price predictors include unexpected changes in inflation, gross national product (GNP), corporate bond spreads and shifts in the yield curve. Ackley also described Micro Economics as Price theory or Value theory. On the other hand, a businessman must take care not to price items so low that they are perceived as being of poorer quality. E(R)i=E(R)z+(E(I)−E(R)z)×βnwhere:E(R)i=Expected return on the assetRz=Risk-free rate of returnβn=Sensitivity of the asset price to macroeconomicfactor nEi=Risk premium associated with factor i\begin{aligned} &\text{E(R)}_\text{i} = E(R)_z + (E(I) - E(R)_z) \times \beta_n\\ &\textbf{where:}\\ &\text{E(R)}_\text{i} = \text{Expected return on the asset}\\ &R_z = \text{Risk-free rate of return}\\ &\beta_n = \text{Sensitivity of the asset price to macroeconomic} \\ &\text{factor}\textit{ n}\\ &Ei = \text{Risk premium associated with factor}\textit{ i}\\ \end{aligned}​E(R)i​=E(R)z​+(E(I)−E(R)z​)×βn​where:E(R)i​=Expected return on the assetRz​=Risk-free rate of returnβn​=Sensitivity of the asset price to macroeconomicfactor nEi=Risk premium associated with factor i​.

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