List and explain factors that influence consumption expenditure
What will be an ideal response?
Disposable income is an important factor that influences consumption expenditure. There is a direct relationship between the two, so that an increase in disposable income leads to an increase in consumption expenditure. There also are three other factors that influence consumption expenditure: the real interest rate, wealth, and expected future disposable income. When the real interest rate falls, wealth increases, or expected future disposable income increases, consumption increases. Alternatively, when the real interest rate rises, wealth decreases, or expected future income decreases, consumption expenditure decreases.
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A horizontal long-run average cost curve indicates
A) constant returns to scale. B) diseconomies of scale. C) constant marginal physical product. D) economies of scale.
A firm sells a product in a purely competitive market. The marginal cost of the product at the current output is $4.00 and the market price is $4.50. What should the firm do?
A. Shut down if the minimum possible average variable cost is below $4.50 B. Decrease output if the minimum possible average variable cost is below $4.50 C. Increase output if the minimum possible average variable cost is below $4.50 D. Decrease output if the minimum possible average variable cost is above $4.50