The principles used in the given case. Concept Introduction: Principles of Individual Choice: “Choice is necessary because resources are scarce”- Resources are always scarce in respect to its use, a single resource can be put to various alternative uses. Therefore, one has to choose between the various uses. “The true cost of something is its opportunity cost ”- The value of any commodity is derived from the forgone cost to get that particular commodity. “How much is the decision at the margin”- The choice of having something depends on the benefits one receive from that choice. “People usually exploit opportunities to make them better off”- People are always fond of alternative incentive, which can make them in better situation as compared to the previous situation. “ Gains from trade ”- Individual always gain from trade by selling the product in which they are specialized and purchasing the product in which they are comparatively less specialized. “Market moves towards equilibrium”- Market always tries to settle down at a point where no individual is comparatively better off in changing his choice. “Resources should be used efficiently to achieve society’s goals”- Resources should be used in such a way that will not make any better off by making the other individual worse off. “Markets usually lead to efficiency”- People always look for the opportunity, which can make them better off without making any other person worse off, this leads to efficiency in the market. “When markets don’t achieve efficiency, government intervention can improve society’s welfare”- Government intervention is required when the market do not correct itself. “One person’s spending is another person’s income”- The economy will always go on because a person earns only when the other person spends. “Overall spending sometimes gets out of line with the economy’s productive capacity”- The economy can face inflation at the time when spending of whole economy raises all together. “Government policies can change spending”- Various fiscal and monetary policies of government are used to correct the situation of the economy and adjust the spending.

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Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 1, Problem 1P

To determine

The principles used in the given case.

Concept Introduction:

Principles of Individual Choice:

“Choice is necessary because resources are scarce”- Resources are always scarce in respect to its use, a single resource can be put to various alternative uses. Therefore, one has to choose between the various uses.

“The true cost of something is its opportunity cost”- The value of any commodity is derived from the forgone cost to get that particular commodity.

“How much is the decision at the margin”- The choice of having something depends on the benefits one receive from that choice.

“People usually exploit opportunities to make them better off”- People are always fond of alternative incentive, which can make them in better situation as compared to the previous situation.

“Gains from trade”- Individual always gain from trade by selling the product in which they are specialized and purchasing the product in which they are comparatively less specialized.

“Market moves towards equilibrium”- Market always tries to settle down at a point where no individual is comparatively better off in changing his choice.

“Resources should be used efficiently to achieve society’s goals”- Resources should be used in such a way that will not make any better off by making the other individual worse off.

“Markets usually lead to efficiency”- People always look for the opportunity, which can make them better off without making any other person worse off, this leads to efficiency in the market.

“When markets don’t achieve efficiency, government intervention can improve society’s welfare”- Government intervention is required when the market do not correct itself.

“One person’s spending is another person’s income”- The economy will always go on because a person earns only when the other person spends.

“Overall spending sometimes gets out of line with the economy’s productive capacity”- The economy can face inflation at the time when spending of whole economy raises all together.

“Government policies can change spending”- Various fiscal and monetary policies of government are used to correct the situation of the economy and adjust the spending.

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Problem 3 You are given the following demand for European luxury automobiles: Q=1,000 P-0.5.2/1.6 where P-Price of European luxury cars PA = Price of American luxury cars P, Price of Japanese luxury cars I= Annual income of car buyers Assume that each of the coefficients is statistically significant (i.e., that they passed the t-test). On the basis of the information given, answer the following questions 1. Comment on the degree of substitutability between European and American luxury cars and between European and Japanese luxury cars. Explain some possible reasons for the results in the equation. 2. Comment on the coefficient for the income variable. Is this result what you would expect? Explain. 3. Comment on the coefficient of the European car price variable. Is that what you would expect? Explain.

Problem 2: A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product: Q=+15,000-2.80P+150A+0.3P+0.35Pm+0.2Pc (5,234) (1.29) (175) (0.12) (0.17) (0.13) R²=0.68 SER 786 F=21.25 The variables and their assumed values are P = Price of basic model = 7,000 Q==Quantity A = Advertising expenditures (in thousands) = 52 P = Average price of a personal computer = 4,000 P. Average price of a minicomputer = 15,000 Pe Average price of a leading competitor's workstation = 8,000 1. Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm's marketing and pricing policies? 2. Conduct a t-test for the statistical significance of each variable. In each case, state whether a one-tail or two-tail test is required. What difference, if any, does it make to…

Answer 2

Question

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 1, Problem 1P

To determine

The principles used in the given case.

Concept Introduction:

Principles of Individual Choice:

“Choice is necessary because resources are scarce”- Resources are always scarce in respect to its use, a single resource can be put to various alternative uses. Therefore, one has to choose between the various uses.

“The true cost of something is its opportunity cost”- The value of any commodity is derived from the forgone cost to get that particular commodity.

“How much is the decision at the margin”- The choice of having something depends on the benefits one receive from that choice.

“People usually exploit opportunities to make them better off”- People are always fond of alternative incentive, which can make them in better situation as compared to the previous situation.

“Gains from trade”- Individual always gain from trade by selling the product in which they are specialized and purchasing the product in which they are comparatively less specialized.

“Market moves towards equilibrium”- Market always tries to settle down at a point where no individual is comparatively better off in changing his choice.

“Resources should be used efficiently to achieve society’s goals”- Resources should be used in such a way that will not make any better off by making the other individual worse off.

“Markets usually lead to efficiency”- People always look for the opportunity, which can make them better off without making any other person worse off, this leads to efficiency in the market.

“When markets don’t achieve efficiency, government intervention can improve society’s welfare”- Government intervention is required when the market do not correct itself.

“One person’s spending is another person’s income”- The economy will always go on because a person earns only when the other person spends.

“Overall spending sometimes gets out of line with the economy’s productive capacity”- The economy can face inflation at the time when spending of whole economy raises all together.

“Government policies can change spending”- Various fiscal and monetary policies of government are used to correct the situation of the economy and adjust the spending.

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Answer 3

Question

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 1, Problem 1P

To determine

The principles used in the given case.

Concept Introduction:

Principles of Individual Choice:

“Choice is necessary because resources are scarce”- Resources are always scarce in respect to its use, a single resource can be put to various alternative uses. Therefore, one has to choose between the various uses.

“The true cost of something is its opportunity cost”- The value of any commodity is derived from the forgone cost to get that particular commodity.

“How much is the decision at the margin”- The choice of having something depends on the benefits one receive from that choice.

“People usually exploit opportunities to make them better off”- People are always fond of alternative incentive, which can make them in better situation as compared to the previous situation.

“Gains from trade”- Individual always gain from trade by selling the product in which they are specialized and purchasing the product in which they are comparatively less specialized.

“Market moves towards equilibrium”- Market always tries to settle down at a point where no individual is comparatively better off in changing his choice.

“Resources should be used efficiently to achieve society’s goals”- Resources should be used in such a way that will not make any better off by making the other individual worse off.

“Markets usually lead to efficiency”- People always look for the opportunity, which can make them better off without making any other person worse off, this leads to efficiency in the market.

“When markets don’t achieve efficiency, government intervention can improve society’s welfare”- Government intervention is required when the market do not correct itself.

“One person’s spending is another person’s income”- The economy will always go on because a person earns only when the other person spends.

“Overall spending sometimes gets out of line with the economy’s productive capacity”- The economy can face inflation at the time when spending of whole economy raises all together.

“Government policies can change spending”- Various fiscal and monetary policies of government are used to correct the situation of the economy and adjust the spending.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

Chapter 1, Problem 1P

To determine