Prof. Marshall works out a relationship between price elasticity of demand and total expenditure. He estimates the degree of price elasticity of demand depending on the change in total expenditure caused by a change in own price of the commodity. He states three different situations, as under: Situation 1 - Ed = Unitary or Ed = 1: Elasticity of demand [...]
Basically, we are focusing on two relationships: 1. Relation between Average Cost and Marginal Cost, and 2. Relation between Total Cost and Marginal Cost. Details are as under: 1. Relation between Average Cost and Marginal Cost: Relation between average cost and marginal cost is explained through Table 8 and Fig. 9. Table 8 and Fig. 9 offer the following observations [...]
There is a close relation between the stock market and investment. Fluctuations in the stock market can affect investment of firms. The relationship between stock prices and firms' investment in physical capital is captured by the "q theory of investment", developed by James Tobin. Suppose a firm has 10 machines and 10 shares outstanding—one share per machine. Suppose the price [...]