Recession: Every economy faces different business cycle at different point of time. Recession is one of such business cycle. During recession, there is huge unemployment and fall in production of goods and services. Recession slows down the business activities. The main reason for such phenomenon is the lack of demand and low investment level. When the recession is for longer duration it is known as depression. Causes of Recession: Below given are the causes of recession: Rise in oil price : When the price of oil increases the prices of every commodities rises due to increase in input cost . Fall in House price: When there is fall in prices of house the wealth of household decreases compelling them to spend less on consumption of goods Loss in consumer confidence: This leads to decrease in consumption level as people think that the economy is going through bad condition. Credit Crunch: It is the situation when people do not have money to invest or consume as the loans are not easily accessible. Rise in Interest Rate: It lowers the amount of investment in an economy which results into low output and employment level. To explain: Reason for rise in gas prices during recession and fall in prices after recession.

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Answer 1

Question

Chapter 12, Problem 1QFT

To determine

Concept Introduction:

Recession: Every economy faces different business cycle at different point of time. Recession is one of such business cycle. During recession, there is huge unemployment and fall in production of goods and services. Recession slows down the business activities.

The main reason for such phenomenon is the lack of demand and low investment level. When the recession is for longer duration it is known as depression.

Causes of Recession: Below given are the causes of recession:

Rise in oil price: When the price of oil increases the prices of every commodities rises due to increase in input cost.

Fall in House price: When there is fall in prices of house the wealth of household decreases compelling them to spend less on consumption of goods

Loss in consumer confidence: This leads to decrease in consumption level as people think that the economy is going through bad condition.

Credit Crunch: It is the situation when people do not have money to invest or consume as the loans are not easily accessible.

Rise in Interest Rate: It lowers the amount of investment in an economy which results into low output and employment level.

To explain:

Reason for rise in gas prices during recession and fall in prices after recession.

Expert Solution & Answer

Explanation of Solution

Gas price rose during the recession of 1970 due to increase in demand for fuel efficient car and the price decrease after great recession because of huge unemployment that reduced the income level.

During 1970, due to increase in the price of oil people started to demand the substitute goods like fuel efficient car. As a result the demand for such car increased tremendously.

This led to increase in the demand for fuel because increase in the average of the car was not more in comparison to demand.

But the price started to fall after great depression because the recession has caused huge unemployment in the economy. This led to fall in demand for cars and as a result for gas oil.

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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

Chapter 12, Problem 1QFT

To determine

Concept Introduction:

Recession: Every economy faces different business cycle at different point of time. Recession is one of such business cycle. During recession, there is huge unemployment and fall in production of goods and services. Recession slows down the business activities.

The main reason for such phenomenon is the lack of demand and low investment level. When the recession is for longer duration it is known as depression.

Causes of Recession: Below given are the causes of recession:

Rise in oil price: When the price of oil increases the prices of every commodities rises due to increase in input cost.

Fall in House price: When there is fall in prices of house the wealth of household decreases compelling them to spend less on consumption of goods

Loss in consumer confidence: This leads to decrease in consumption level as people think that the economy is going through bad condition.

Credit Crunch: It is the situation when people do not have money to invest or consume as the loans are not easily accessible.

Rise in Interest Rate: It lowers the amount of investment in an economy which results into low output and employment level.

To explain:

Reason for rise in gas prices during recession and fall in prices after recession.

Expert Solution & Answer

Explanation of Solution

Gas price rose during the recession of 1970 due to increase in demand for fuel efficient car and the price decrease after great recession because of huge unemployment that reduced the income level.

During 1970, due to increase in the price of oil people started to demand the substitute goods like fuel efficient car. As a result the demand for such car increased tremendously.

This led to increase in the demand for fuel because increase in the average of the car was not more in comparison to demand.

But the price started to fall after great depression because the recession has caused huge unemployment in the economy. This led to fall in demand for cars and as a result for gas oil.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 12, Problem 1QFT

To determine

Concept Introduction:

Recession: Every economy faces different business cycle at different point of time. Recession is one of such business cycle. During recession, there is huge unemployment and fall in production of goods and services. Recession slows down the business activities.

The main reason for such phenomenon is the lack of demand and low investment level. When the recession is for longer duration it is known as depression.

Causes of Recession: Below given are the causes of recession:

Rise in oil price: When the price of oil increases the prices of every commodities rises due to increase in input cost.

Fall in House price: When there is fall in prices of house the wealth of household decreases compelling them to spend less on consumption of goods

Loss in consumer confidence: This leads to decrease in consumption level as people think that the economy is going through bad condition.

Credit Crunch: It is the situation when people do not have money to invest or consume as the loans are not easily accessible.

Rise in Interest Rate: It lowers the amount of investment in an economy which results into low output and employment level.

To explain:

Reason for rise in gas prices during recession and fall in prices after recession.

Expert Solution & Answer

Explanation of Solution

Gas price rose during the recession of 1970 due to increase in demand for fuel efficient car and the price decrease after great recession because of huge unemployment that reduced the income level.

During 1970, due to increase in the price of oil people started to demand the substitute goods like fuel efficient car. As a result the demand for such car increased tremendously.

This led to increase in the demand for fuel because increase in the average of the car was not more in comparison to demand.

But the price started to fall after great depression because the recession has caused huge unemployment in the economy. This led to fall in demand for cars and as a result for gas oil.

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Answer 4

Question

Chapter 12, Problem 1QFT

To determine

Concept Introduction:

Recession: Every economy faces different business cycle at different point of time. Recession is one of such business cycle. During recession, there is huge unemployment and fall in production of goods and services. Recession slows down the business activities.

The main reason for such phenomenon is the lack of demand and low investment level. When the recession is for longer duration it is known as depression.

Causes of Recession: Below given are the causes of recession:

Rise in oil price: When the price of oil increases the prices of every commodities rises due to increase in input cost.

Fall in House price: When there is fall in prices of house the wealth of household decreases compelling them to spend less on consumption of goods

Loss in consumer confidence: This leads to decrease in consumption level as people think that the economy is going through bad condition.

Credit Crunch: It is the situation when people do not have money to invest or consume as the loans are not easily accessible.

Rise in Interest Rate: It lowers the amount of investment in an economy which results into low output and employment level.

To explain:

Reason for rise in gas prices during recession and fall in prices after recession.

Expert Solution & Answer

Explanation of Solution

Gas price rose during the recession of 1970 due to increase in demand for fuel efficient car and the price decrease after great recession because of huge unemployment that reduced the income level.

During 1970, due to increase in the price of oil people started to demand the substitute goods like fuel efficient car. As a result the demand for such car increased tremendously.

This led to increase in the demand for fuel because increase in the average of the car was not more in comparison to demand.

But the price started to fall after great depression because the recession has caused huge unemployment in the economy. This led to fall in demand for cars and as a result for gas oil.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 12, Problem 1QFT

To determine

Concept Introduction:

Recession: Every economy faces different business cycle at different point of time. Recession is one of such business cycle. During recession, there is huge unemployment and fall in production of goods and services. Recession slows down the business activities.

The main reason for such phenomenon is the lack of demand and low investment level. When the recession is for longer duration it is known as depression.

Causes of Recession: Below given are the causes of recession:

Rise in oil price: When the price of oil increases the prices of every commodities rises due to increase in input cost.

Fall in House price: When there is fall in prices of house the wealth of household decreases compelling them to spend less on consumption of goods

Loss in consumer confidence: This leads to decrease in consumption level as people think that the economy is going through bad condition.

Credit Crunch: It is the situation when people do not have money to invest or consume as the loans are not easily accessible.

Rise in Interest Rate: It lowers the amount of investment in an economy which results into low output and employment level.

To explain:

Reason for rise in gas prices during recession and fall in prices after recession.

Expert Solution & Answer

Explanation of Solution

Gas price rose during the recession of 1970 due to increase in demand for fuel efficient car and the price decrease after great recession because of huge unemployment that reduced the income level.

During 1970, due to increase in the price of oil people started to demand the substitute goods like fuel efficient car. As a result the demand for such car increased tremendously.

This led to increase in the demand for fuel because increase in the average of the car was not more in comparison to demand.

But the price started to fall after great depression because the recession has caused huge unemployment in the economy. This led to fall in demand for cars and as a result for gas oil.

Answer 6

Chapter 12, Problem 1QFT

To determine

Concept Introduction:

Recession: Every economy faces different business cycle at different point of time. Recession is one of such business cycle. During recession, there is huge unemployment and fall in production of goods and services. Recession slows down the business activities.

The main reason for such phenomenon is the lack of demand and low investment level. When the recession is for longer duration it is known as depression.

Causes of Recession: Below given are the causes of recession:

Rise in oil price: When the price of oil increases the prices of every commodities rises due to increase in input cost.

Fall in House price: When there is fall in prices of house the wealth of household decreases compelling them to spend less on consumption of goods

Loss in consumer confidence: This leads to decrease in consumption level as people think that the economy is going through bad condition.

Credit Crunch: It is the situation when people do not have money to invest or consume as the loans are not easily accessible.

Rise in Interest Rate: It lowers the amount of investment in an economy which results into low output and employment level.

To explain:

Reason for rise in gas prices during recession and fall in prices after recession.

Expert Solution & Answer

Explanation of Solution

Gas price rose during the recession of 1970 due to increase in demand for fuel efficient car and the price decrease after great recession because of huge unemployment that reduced the income level.

During 1970, due to increase in the price of oil people started to demand the substitute goods like fuel efficient car. As a result the demand for such car increased tremendously.

This led to increase in the demand for fuel because increase in the average of the car was not more in comparison to demand.

But the price started to fall after great depression because the recession has caused huge unemployment in the economy. This led to fall in demand for cars and as a result for gas oil.

Answer 7

Chapter 12, Problem 1QFT

To determine

Concept Introduction:

Recession: Every economy faces different business cycle at different point of time. Recession is one of such business cycle. During recession, there is huge unemployment and fall in production of goods and services. Recession slows down the business activities.

The main reason for such phenomenon is the lack of demand and low investment level. When the recession is for longer duration it is known as depression.

Causes of Recession: Below given are the causes of recession:

Rise in oil price: When the price of oil increases the prices of every commodities rises due to increase in input cost.

Fall in House price: When there is fall in prices of house the wealth of household decreases compelling them to spend less on consumption of goods

Loss in consumer confidence: This leads to decrease in consumption level as people think that the economy is going through bad condition.

Credit Crunch: It is the situation when people do not have money to invest or consume as the loans are not easily accessible.

Rise in Interest Rate: It lowers the amount of investment in an economy which results into low output and employment level.

To explain:

Reason for rise in gas prices during recession and fall in prices after recession.

Answer 8

Expert Solution & Answer

Explanation of Solution

Gas price rose during the recession of 1970 due to increase in demand for fuel efficient car and the price decrease after great recession because of huge unemployment that reduced the income level.

During 1970, due to increase in the price of oil people started to demand the substitute goods like fuel efficient car. As a result the demand for such car increased tremendously.

This led to increase in the demand for fuel because increase in the average of the car was not more in comparison to demand.

But the price started to fall after great depression because the recession has caused huge unemployment in the economy. This led to fall in demand for cars and as a result for gas oil.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 12 - Prob. 1QFT Ch. 12 - Prob. 2QFT Ch. 12 - Prob. 3QFT Ch. 12 - Prob. 1P Ch. 12 - Prob. 2P Ch. 12 - Prob. 3P Ch. 12 - Prob. 4P Ch. 12 - Prob. 5P Ch. 12 - Prob. 6P Ch. 12 - Prob. 7P

Explanation of Solution

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Chapter 12 Solutions