Determine the relation between wealth and saving.

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Answer 1

Question

Chapter 9, Problem 1RQ

To determine

Determine the relation between wealth and saving.

Expert Solution & Answer

Explanation of Solution

The wealth measures the current value of a stock of assets owned by someone or society as a whole. That means, the wealth is a stock variable. For example, if a person says that ‘I have $10,000 in my bank account’, then it is the wealth of that person for that particular moment whereas saving is a flow variable, which is measured as per the unit of time. For example, if a person says that ‘I save $10 per week’, then it indicates one-week savings of that person. Here, the amount of wealth is increased at a growth rate of $20 per weeks.

Saving is not the only source that increases the wealth of a person. The value of wealth will also increase when the value of the assets held by an individual rise, this is called the capital gain. For example, Person B holds $2,000 in stock. Hence, when 2% increase in the value of assets causes increase in the value of wealth to $2040 (20% of 2000 plus 2000).

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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 9, Problem 1RQ

To determine

Determine the relation between wealth and saving.

Expert Solution & Answer

Explanation of Solution

The wealth measures the current value of a stock of assets owned by someone or society as a whole. That means, the wealth is a stock variable. For example, if a person says that ‘I have $10,000 in my bank account’, then it is the wealth of that person for that particular moment whereas saving is a flow variable, which is measured as per the unit of time. For example, if a person says that ‘I save $10 per week’, then it indicates one-week savings of that person. Here, the amount of wealth is increased at a growth rate of $20 per weeks.

Saving is not the only source that increases the wealth of a person. The value of wealth will also increase when the value of the assets held by an individual rise, this is called the capital gain. For example, Person B holds $2,000 in stock. Hence, when 2% increase in the value of assets causes increase in the value of wealth to $2040 (20% of 2000 plus 2000).

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Answer 3

Question

Chapter 9, Problem 1RQ

To determine

Determine the relation between wealth and saving.

Expert Solution & Answer

Explanation of Solution

The wealth measures the current value of a stock of assets owned by someone or society as a whole. That means, the wealth is a stock variable. For example, if a person says that ‘I have $10,000 in my bank account’, then it is the wealth of that person for that particular moment whereas saving is a flow variable, which is measured as per the unit of time. For example, if a person says that ‘I save $10 per week’, then it indicates one-week savings of that person. Here, the amount of wealth is increased at a growth rate of $20 per weeks.

Saving is not the only source that increases the wealth of a person. The value of wealth will also increase when the value of the assets held by an individual rise, this is called the capital gain. For example, Person B holds $2,000 in stock. Hence, when 2% increase in the value of assets causes increase in the value of wealth to $2040 (20% of 2000 plus 2000).

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Answer 4

Question

Chapter 9, Problem 1RQ

To determine

Determine the relation between wealth and saving.

Expert Solution & Answer

Explanation of Solution

The wealth measures the current value of a stock of assets owned by someone or society as a whole. That means, the wealth is a stock variable. For example, if a person says that ‘I have $10,000 in my bank account’, then it is the wealth of that person for that particular moment whereas saving is a flow variable, which is measured as per the unit of time. For example, if a person says that ‘I save $10 per week’, then it indicates one-week savings of that person. Here, the amount of wealth is increased at a growth rate of $20 per weeks.

Saving is not the only source that increases the wealth of a person. The value of wealth will also increase when the value of the assets held by an individual rise, this is called the capital gain. For example, Person B holds $2,000 in stock. Hence, when 2% increase in the value of assets causes increase in the value of wealth to $2040 (20% of 2000 plus 2000).

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Answer 5

Chapter 9, Problem 1RQ

To determine

Determine the relation between wealth and saving.

Expert Solution & Answer

Explanation of Solution

The wealth measures the current value of a stock of assets owned by someone or society as a whole. That means, the wealth is a stock variable. For example, if a person says that ‘I have $10,000 in my bank account’, then it is the wealth of that person for that particular moment whereas saving is a flow variable, which is measured as per the unit of time. For example, if a person says that ‘I save $10 per week’, then it indicates one-week savings of that person. Here, the amount of wealth is increased at a growth rate of $20 per weeks.

Saving is not the only source that increases the wealth of a person. The value of wealth will also increase when the value of the assets held by an individual rise, this is called the capital gain. For example, Person B holds $2,000 in stock. Hence, when 2% increase in the value of assets causes increase in the value of wealth to $2040 (20% of 2000 plus 2000).

Answer 6

Chapter 9, Problem 1RQ

To determine

Determine the relation between wealth and saving.

Expert Solution & Answer

Explanation of Solution

The wealth measures the current value of a stock of assets owned by someone or society as a whole. That means, the wealth is a stock variable. For example, if a person says that ‘I have $10,000 in my bank account’, then it is the wealth of that person for that particular moment whereas saving is a flow variable, which is measured as per the unit of time. For example, if a person says that ‘I save $10 per week’, then it indicates one-week savings of that person. Here, the amount of wealth is increased at a growth rate of $20 per weeks.

Saving is not the only source that increases the wealth of a person. The value of wealth will also increase when the value of the assets held by an individual rise, this is called the capital gain. For example, Person B holds $2,000 in stock. Hence, when 2% increase in the value of assets causes increase in the value of wealth to $2040 (20% of 2000 plus 2000).

Answer 7

Chapter 9, Problem 1RQ

To determine

Determine the relation between wealth and saving.

Answer 8

Expert Solution & Answer

Explanation of Solution

The wealth measures the current value of a stock of assets owned by someone or society as a whole. That means, the wealth is a stock variable. For example, if a person says that ‘I have $10,000 in my bank account’, then it is the wealth of that person for that particular moment whereas saving is a flow variable, which is measured as per the unit of time. For example, if a person says that ‘I save $10 per week’, then it indicates one-week savings of that person. Here, the amount of wealth is increased at a growth rate of $20 per weeks.

Saving is not the only source that increases the wealth of a person. The value of wealth will also increase when the value of the assets held by an individual rise, this is called the capital gain. For example, Person B holds $2,000 in stock. Hence, when 2% increase in the value of assets causes increase in the value of wealth to $2040 (20% of 2000 plus 2000).