The Strengths And Weaknesses Of A Partnership

Etext link - https://economicsfccblog.files.wordpress.com/2016/09/economics-principles-and-practices1.pdf CHAPTER 3 21. Identify the strengths and weaknesses of a partnership * Advantages - easy to startup, bring different areas of expertise to the business, lack of special taxes on partnership, easy to attract financial capital. More efficient operations that come with larger size workforce * Disadvantages - each partner is fully responsible for the acts of all other partners, limited life, might break up because of conflict 25. Discuss the difference between a horizontal and a vertical merger. * In horizontal merger, two or more firms join forces which manufacture the same product while in the case of vertical merger, firms in different steps of marketing or manufacturing come together. 26. Explain why a corporation might choose to become a conglomerate. * A corporation might choose to become a conglomerate as this will protect its overall sales and profits from isolated economic happenings. 27. Discuss the difference between a nonprofit and other forms of business organizations. * The difference between non profit organizations and other forms of business organizations is that the non profit institutions do not seek financial gain. 28. Describe the purpose of a labor union. * The purpose of a labor union is to work for its members’ interests. 31. Do you think mergers are beneficial for the US economy? Defend your response. * Yes, as companies merge, it will be more profitable for shareholders. 33. What is the difference between the unlimited liability of proprietorships and partnerships, and the limited liability of corporations? Unlimited liability for proprietorships and partnerships implies that all partners have an equal responsibility in relation to the debts owned by the business. Equally, a sole proprietor has a personal responsibility to settle all the obligations and debts incurred in the cause of doing business. On the contrary, limited liability of corporations implies that the shareholders are only responsible for the debts incurred by the corporations up to their level of investment. CHAPTER 4 pg 133 (on etext) 18. The law of demand holds that when all other factors are held constant, an increase in price of a commodity leads to a decrease in the quantity demanded. On the other hand, a decrease in price leads to an increase in the quantity of goods demanded. 20. Income effect is an expression of how consumption of goods and services changes as a result if increased purchasing power. Substitution effect on the other hand measures how consumption is affected as a result of changes in prices and relative income. 21. 17145028575Change in individual demand IncomeSubstitutesFuture expectationsComplementsChanges in demographicsChange in individual demand IncomeSubstitutesFuture expectationsComplementsChanges in demographics An increase in income implies that people have more to spend leading to an increase in demand while the opposite is true. A positive increase in the price of substitutes leads to an increase in the quantity demanded while a reduction in price of substitutes leads to a decrease in the quantity demanded for a product. Increase in population leads to an increase of quantity demanded while a negative change in the price of compliments leads to an increase in quantity demanded of a product. Future expectations many also have either a positive or a negative effect on demand. 22. Elastic demand is when a small change in the price of a commodity leads to a greater change in the quantity demanded of the same product. Inelastic demand on the other hand occurs when a change in the price of a product has little or no effect on the quantity demanded. 24. Income – Demand elasticity is dependent on income. For higher income households, a change in the price of a commodity will have little or no effect on the level of demand. Proportion of income spent on a product – For certain products such as salt, individuals spend very little amount of their income to buy them implying that a change in price will have little or no effect on quantity demanded. Availability of Substitutes – An increase in the price of substitutes will lead to an increase in demand of a product. Uses of a commodity – If a product has many uses such as in the case of raw materials, the demand of such products will be elastic while the opposite is true. CHAPTER 5 Pg 161 (on etext) 19 Supply is the quantity of a product that producers are willing to sell at a given market price all other things remaining constant. 20 A market supply curve is a representation of the total supplies by producers in a given market. It shows how the quantity of goods supplied varies as price changes. An individual supply curve is a representation of how the quantity of a product supplied by a single supplier varies as price changes. 21 An increase in the price of a product will lead to an increase in supply and vice versa. An increase in cost of products will lead to a decrease in supply of a given product. Technological advancement necessarily leads to an increase in the level of supply of goods and services. Government policies also have a huge impact on quantity of goods supplied. For example, an increase in tax on excise duties will lead to a decrease in supply. Other factors that affect supply include availability of substitutes and natural conditions. 23 Total product is the total output that a production unit can produce while employing a combination of factors of production. Marginal product on the other hand is the additional output produced when additional production factors are employed. 24 The first stage of production is characterized by increased average output. As input that is more variable is applied, the marginal product of the input increases. The second stage is characterized by a decrease though positive marginal returns. The law of diminishing marginal returns orchestrates this. The third and final stage of production is characterized by negative marginal returns. 25 Marginal costs is the change in total cost when quantity of good produces changes by ne unit. 26 Fixed costs remains the same regardless of the output produced. Variable costs on the other hand vary depending on the output produced. Chapter 6 Pg 185 (on etext) 9-12, 14, 17, 21 9. Discuss why allocating resources without prices is difficult. When resources are made available at no cost, people become greedy. Charging a price gives people a selfish motive to restrain their greed. 10. Explain why prices are neutral. 11. Explain what is meant by the term market equilibrium Market equilibrium is a market state where the supply in the market is equal to the demand in the market. 12. Describe the role of shortages and surpluses in competitive markets In a competitive market, constant pressure from shortages and surplus...