Question

Why do both the chain-weighted index for GDP and the CPI overstate actual price increases? Explain...

Why do both the chain-weighted index for GDP and the CPI overstate actual price increases?

Explain the economic concept of convergence.

Define the "consumption function."

List and briefly describe the five factors of production.

What is the opportunity cost of investing $10,000 of your own money in a business you wish to start?

Explain the difference between a change in quantity demanded and a change in demand.

Homework Answers

Answer #1

1. Opportunity cost is the value of next best alternative foregone. Opportunity cost of investing $ 10,000 money is the amount of salary which a person can earned without starting a business.

2. Demand for a commodity refers to the desire to buy a commodity backed with sufficient purchasing power and the willingness to spend.

When demand of a commodity changes due to change in price than it is known as change in quantity demanded and it leads to movement in the demand curve. Change in the price of commodity itself causes movement of demand curve.

When demand of a commodity changes due to change in factors other than price than it is known as change in demand and it leads to shift of demand curve either rightward or leftward. Change in income of consumer, taste and preference of consumer, change in price of related goods, etc causes shift of demand curve.

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