The Following Are Common Errors Students Make When Discussing Supply

question 176

Essay

The following are common errors students make when discussing supply and demand. What is the mistake in each?
a. At equilibrium, demand equals supply.
b. The quantity of demand is greater than the quantity of supply.
c. They move along the line from both ends to an equilibrium in the middle.
d. The increase in demand causes an increase in supply.

---

Definitions:

Incremental Value

The additional value generated by making a specific investment or decision, compared to not taking such action.

NPV

Net Present Value is a financial metric that calculates the difference between the present value of cash inflows and outflows over a period of time.

All-Stock Deal

A type of acquisition where the acquiring company purchases the target company's shares with its own stock instead of cash.

Synergy Value

The additional value created from combining two entities, often resulting in increased efficiency or market power.