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MARGINAL-COST PRICING: A pricing scheme in which the price received by a firm is set equal to the marginal cost of production. This is not only the efficient outcome achieved by competitive markets, it is commonly used for comparison of other regulatory policies, such as average-cost pricing, that are used for public utilities (especially those that are natural monopolies). The bad thing about marginal-cost pricing for natural monopolies is that a normal profit is not guaranteed. The good thing about marginal-cost pricing is that marginal cost is equal to price, and the public utility is operating according to the price equals marginal cost (P = MC) rule of efficiency.

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Lesson 8: Market Shocks | Unit 2: Determinants Page: 5 of 20

Topic: Demand <=PAGE BACK | PAGE NEXT=>

Five basic demand determinants:
  • Income: For a normal good an increase in income means an increase in demand. For an inferior good an increase in income means a decrease in demand.
  • Tastes: If people want more of a good, then demand increases.
  • Prices of other goods: A higher price of a substitute good means an increase in demand. A higher price of a complement good means an decrease in demand.
  • Buyer's expectations: If buyers expect higher prices tomorrow, they increase demand today.
  • Number of buyers: More buyers mean more demand.

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INVESTMENT EXPENDITURES

Expenditures made by the business sector on final goods and services, or gross domestic product, especially the purchase of productive capital goods. Investment expenditures play a central role in macroeconomic activity affecting both short-run business cycles and long-run economic growth. These expenditures reflect the general act of investment involving foregoing current satisfaction to produce capital goods and are officially measured by gross private domestic investment. These are one of four expenditures on gross domestic product. The other three are consumption expenditures, government purchases, and net exports.

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BEIGE MUNDORTLE
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Today, you are likely to spend a great deal of time browsing through a long list of dot com websites wanting to buy either a birthday greeting card for your father or a T-shirt commemorating the first day of spring. Be on the lookout for vindictive digital clocks with revenge on their minds.
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The word "fiscal" is derived from a Latin word meaning "moneybag."
"When you play, play hard; when you work, don't play at all. "

-- Theodore Roosevelt, 26th US president

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Autoregressive Conditional Heteroskedasticity
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