Significance of resource pricing and factors determining the resource demand which is different from the factors that determine product demand.

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Answer 1

Question

Chapter 14, Problem 1DQ

To determine

Significance of resource pricing and factors determining the resource demand which is different from the factors that determine product demand.

Expert Solution & Answer

Explanation of Solution

Households own the scarce resources which is their source of income. The resource pricing determines the income of households as firms acquire economic resources and pay as wage, rent, interest and profit to the household for the supply of resources. Resource pricing are the costs for the firm. Firms always desire to minimize the cost and maximize the profit. This in turn, would encourage the firms to efficiently use the scarce resource. Resource pricing helps in determining the allocation of resources in industries and firms.

The demand for products is determined by the income and tastes, whereas the demand for resources is passive based on demand of product that requires particular resources. The demand of resources depends on the demand of product. Unlike product, resources are less mobile. The demand of product is determined by geographic availability of resources. Thus, resources that demand geographically vary affecting the demand of products.

Since the demand for resources depends on the demand for goods and services, it is a derived demand. If there is no demand for goods, then there will no demand for resource too. Also, the demand for resource is determined by the productivity and its price.

If the resource price is low, then the cost of production will be low causing to increase the demand for resources and vice versa. Thus, the demand curve for resource slopes in the downward direction due to the law of diminishing returns.

Economics Concept Introduction

Concept introduction:

Resource pricing: Resource price refers to the pricing of natural and scarce resource for the optimum use.

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Students have asked these similar questions

5. Some people find options expensive and use more complex structures to reduce the cost. For example, consider buying a call with a strike of $55 and selling a call with a strike of $60. a. What is the cost of establishing this combined position? b. What is the payoff of the combined position if the market price goes to $60? c. What is the payoff of the combined position if the market price goes to $100?

3. An investor has $1,000 to invest. They believe the price of the underlier will increase to $60 within one year. a. How many shares of stock could they buy with the $1,000 at the current price of $50, and how much would they make if the share price increased to $60? b. How many calls with a strike of $55 could they buy for the same $1,000, and how much would they make if the share price increased to $60? c. How much would they make (or lose) from the stock and from the calls if the share price declined to $40? 4. What is the premium on a call with a strike of $0.01? Why is the premium so close to the $50 share price?

1. We want to examine the comparative statics of the Black Scholes model. Complete the following table using the Excel model from class or another of your choice. Provide the call premium and the put premium for each scenario. Underlier Risk-free Scenario price rate Volatility Time to expiration Strike Call premium Put premium Baseline $50 5% 25% 1 year $55 Higher strike $50 5% 25% 1 year $60 Higher volatility $50 5% 40% 1 year $55 Higher risk free $50 8% 25% 1 year $55 More time $50 5% 25% 2 years $55 2. Look at the baseline scenario. a. What is the probability that the call is exercised in the baseline scenario? b. What is the probability that the put is exercised? c. Explain why the probabilities sum to 1.

Answer 2

Question

Chapter 14, Problem 1DQ

To determine

Significance of resource pricing and factors determining the resource demand which is different from the factors that determine product demand.

Expert Solution & Answer

Explanation of Solution

Households own the scarce resources which is their source of income. The resource pricing determines the income of households as firms acquire economic resources and pay as wage, rent, interest and profit to the household for the supply of resources. Resource pricing are the costs for the firm. Firms always desire to minimize the cost and maximize the profit. This in turn, would encourage the firms to efficiently use the scarce resource. Resource pricing helps in determining the allocation of resources in industries and firms.

The demand for products is determined by the income and tastes, whereas the demand for resources is passive based on demand of product that requires particular resources. The demand of resources depends on the demand of product. Unlike product, resources are less mobile. The demand of product is determined by geographic availability of resources. Thus, resources that demand geographically vary affecting the demand of products.

Since the demand for resources depends on the demand for goods and services, it is a derived demand. If there is no demand for goods, then there will no demand for resource too. Also, the demand for resource is determined by the productivity and its price.

If the resource price is low, then the cost of production will be low causing to increase the demand for resources and vice versa. Thus, the demand curve for resource slopes in the downward direction due to the law of diminishing returns.

Economics Concept Introduction

Concept introduction:

Resource pricing: Resource price refers to the pricing of natural and scarce resource for the optimum use.

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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 14, Problem 1DQ

To determine

Significance of resource pricing and factors determining the resource demand which is different from the factors that determine product demand.

Expert Solution & Answer

Explanation of Solution

Households own the scarce resources which is their source of income. The resource pricing determines the income of households as firms acquire economic resources and pay as wage, rent, interest and profit to the household for the supply of resources. Resource pricing are the costs for the firm. Firms always desire to minimize the cost and maximize the profit. This in turn, would encourage the firms to efficiently use the scarce resource. Resource pricing helps in determining the allocation of resources in industries and firms.

The demand for products is determined by the income and tastes, whereas the demand for resources is passive based on demand of product that requires particular resources. The demand of resources depends on the demand of product. Unlike product, resources are less mobile. The demand of product is determined by geographic availability of resources. Thus, resources that demand geographically vary affecting the demand of products.

Since the demand for resources depends on the demand for goods and services, it is a derived demand. If there is no demand for goods, then there will no demand for resource too. Also, the demand for resource is determined by the productivity and its price.

If the resource price is low, then the cost of production will be low causing to increase the demand for resources and vice versa. Thus, the demand curve for resource slopes in the downward direction due to the law of diminishing returns.

Economics Concept Introduction

Concept introduction:

Resource pricing: Resource price refers to the pricing of natural and scarce resource for the optimum use.

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

Answer 4

Question

Chapter 14, Problem 1DQ

To determine

Significance of resource pricing and factors determining the resource demand which is different from the factors that determine product demand.

Expert Solution & Answer

Explanation of Solution

Households own the scarce resources which is their source of income. The resource pricing determines the income of households as firms acquire economic resources and pay as wage, rent, interest and profit to the household for the supply of resources. Resource pricing are the costs for the firm. Firms always desire to minimize the cost and maximize the profit. This in turn, would encourage the firms to efficiently use the scarce resource. Resource pricing helps in determining the allocation of resources in industries and firms.

The demand for products is determined by the income and tastes, whereas the demand for resources is passive based on demand of product that requires particular resources. The demand of resources depends on the demand of product. Unlike product, resources are less mobile. The demand of product is determined by geographic availability of resources. Thus, resources that demand geographically vary affecting the demand of products.

Since the demand for resources depends on the demand for goods and services, it is a derived demand. If there is no demand for goods, then there will no demand for resource too. Also, the demand for resource is determined by the productivity and its price.

If the resource price is low, then the cost of production will be low causing to increase the demand for resources and vice versa. Thus, the demand curve for resource slopes in the downward direction due to the law of diminishing returns.

Economics Concept Introduction

Concept introduction:

Resource pricing: Resource price refers to the pricing of natural and scarce resource for the optimum use.

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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 14, Problem 1DQ

To determine

Significance of resource pricing and factors determining the resource demand which is different from the factors that determine product demand.

Expert Solution & Answer

Explanation of Solution

Households own the scarce resources which is their source of income. The resource pricing determines the income of households as firms acquire economic resources and pay as wage, rent, interest and profit to the household for the supply of resources. Resource pricing are the costs for the firm. Firms always desire to minimize the cost and maximize the profit. This in turn, would encourage the firms to efficiently use the scarce resource. Resource pricing helps in determining the allocation of resources in industries and firms.

The demand for products is determined by the income and tastes, whereas the demand for resources is passive based on demand of product that requires particular resources. The demand of resources depends on the demand of product. Unlike product, resources are less mobile. The demand of product is determined by geographic availability of resources. Thus, resources that demand geographically vary affecting the demand of products.

Since the demand for resources depends on the demand for goods and services, it is a derived demand. If there is no demand for goods, then there will no demand for resource too. Also, the demand for resource is determined by the productivity and its price.

If the resource price is low, then the cost of production will be low causing to increase the demand for resources and vice versa. Thus, the demand curve for resource slopes in the downward direction due to the law of diminishing returns.

Economics Concept Introduction

Concept introduction:

Resource pricing: Resource price refers to the pricing of natural and scarce resource for the optimum use.

Answer 6

Chapter 14, Problem 1DQ

To determine

Significance of resource pricing and factors determining the resource demand which is different from the factors that determine product demand.

Expert Solution & Answer

Explanation of Solution

Households own the scarce resources which is their source of income. The resource pricing determines the income of households as firms acquire economic resources and pay as wage, rent, interest and profit to the household for the supply of resources. Resource pricing are the costs for the firm. Firms always desire to minimize the cost and maximize the profit. This in turn, would encourage the firms to efficiently use the scarce resource. Resource pricing helps in determining the allocation of resources in industries and firms.

The demand for products is determined by the income and tastes, whereas the demand for resources is passive based on demand of product that requires particular resources. The demand of resources depends on the demand of product. Unlike product, resources are less mobile. The demand of product is determined by geographic availability of resources. Thus, resources that demand geographically vary affecting the demand of products.

Since the demand for resources depends on the demand for goods and services, it is a derived demand. If there is no demand for goods, then there will no demand for resource too. Also, the demand for resource is determined by the productivity and its price.

If the resource price is low, then the cost of production will be low causing to increase the demand for resources and vice versa. Thus, the demand curve for resource slopes in the downward direction due to the law of diminishing returns.

Economics Concept Introduction

Concept introduction:

Resource pricing: Resource price refers to the pricing of natural and scarce resource for the optimum use.

Answer 7

Chapter 14, Problem 1DQ

To determine

Significance of resource pricing and factors determining the resource demand which is different from the factors that determine product demand.

Answer 8

Expert Solution & Answer

Explanation of Solution

Households own the scarce resources which is their source of income. The resource pricing determines the income of households as firms acquire economic resources and pay as wage, rent, interest and profit to the household for the supply of resources. Resource pricing are the costs for the firm. Firms always desire to minimize the cost and maximize the profit. This in turn, would encourage the firms to efficiently use the scarce resource. Resource pricing helps in determining the allocation of resources in industries and firms.

The demand for products is determined by the income and tastes, whereas the demand for resources is passive based on demand of product that requires particular resources. The demand of resources depends on the demand of product. Unlike product, resources are less mobile. The demand of product is determined by geographic availability of resources. Thus, resources that demand geographically vary affecting the demand of products.

Since the demand for resources depends on the demand for goods and services, it is a derived demand. If there is no demand for goods, then there will no demand for resource too. Also, the demand for resource is determined by the productivity and its price.

If the resource price is low, then the cost of production will be low causing to increase the demand for resources and vice versa. Thus, the demand curve for resource slopes in the downward direction due to the law of diminishing returns.