(Figure: Predicting Market Shifts) Why Is There a Tendency for This

question 217

Multiple Choice

(Figure: Predicting Market Shifts) Why is there a tendency for this market to move from P₁ to P₂?

• A) The presence of excess inventories forces firms to cut prices.
• B) The presence of an economic shortage induces firms to offer lower prices.
• C) The government wants to rationalize the market.
• D) Nature abhors a vacuum.

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Definitions:

Useful Life

The estimated time period that an asset is expected to be used by a business or be productive.

Straight-Line Rate

A method of calculating the depreciation of an asset, which allocates an equal depreciation expense each year over the asset's useful life.

Double Declining-Balance

A method of accelerated depreciation that doubles the straight-line depreciation rate, allowing for faster asset expense recognition.

Modified Accelerated Cost Recovery

A tax depreciation system in the U.S. that allows for the accelerated depreciation of property under certain conditions.