Suppose That We Are in a Condition of "Stuck" Prices

question 11

Essay

Suppose that we are in a condition of "stuck" prices so that the price of nails will not go above or below $2/kg.Further suppose that nail factories have been built on a business plan designed to deliver 6,000 kg/week.How many nails will be sold in a market in which demand (which includes a modest amount of inventory) is characterized by: (a) P = 5 - 0.5Q, (b) P = 6 - 0.5Q, and (c) P = 4 - 0.5Q, where P is in $/kg and Q is in thousands of kg/week? In each case, what happens to inventory.

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Definitions:

Transaction Fee

A charge levied for processing a payment or financial transaction.

Shares

Units of ownership interest in a corporation or financial asset that provide for an equal distribution in any profits, if any are declared, in the form of dividends.

Rate of Yield

The percentage of return on an investment, calculated by dividing the income generated by the investment by the cost or current market value of the investment.

Stock Listing

The process of adding a company's shares to the available stocks that can be traded on a particular stock exchange.