Microeconomics Assignment Example | Topics and Well Written Essays - 750 words - 3

Microeconomics - Assignment Example A good graphical representation of functional utility is shown below. Marginal rate of substitution represents the rate at which customers are ready to give up one commodity in order to exchange while ensuring a same level of utility. MRS varies with points along the indifference hence it is vital to keep locally in the definition. In addition, MRS of a commodity X is equivalent to the marginal utility of X over the marginal utility of Y. a. An increase in the price of a normal good: This had direct effect of changes in income on consumption choice. In this case, consumers buy more goods when their income rises as the prices remain fixed in the market. In this case, a change in the income of the buyer causes the demand curve to shift. This is evident through a negatively sloped demand curve to counter the space in the exhibit. Therefore, the increase in demand causes an increase in demand and a shift to the right of the demand curve for living space. b. A decrease in the price of an inferior good: In the market, a decrease in the prices of such goods leads to increase in the equilibrium quantity demanded. Therefore, the substitution effect would force the consumer to buy more of the good. c. An increase in the price of a Giffen good: In economics, an increase in the prices of Giffen good increases the quantity of the good that is demanded in the market. This results to an upward sloping demand curve due to interactions of the income and substitution effects. The income effect can be positive or negative when the price of these goods

Corporate Finance Coursework Essay Example | Topics and Well Written Essays - 2000 words

Corporate Finance Coursework - Essay Example It is a given business and finance objective to maximize shareholder value. It appears that there are also non-financial objectives of business hence the debate on shareholder value and stakeholder society rages on. The application of corporate finance theory will therefore will dwell in determining how real is the debate in relation to investment decisions in China under the new draft of Chinese employment contract law? Tirole, Jean (1996) dissected corporate governance on a debate between shareholder value and stakeholder society. He mentioned that corporate governance could be framed in terms of â€Å"shareholder value† using the economists assertion that â€Å"prices reflect the scarcity of resources that management should aim at maximizing shareholder wealth.† On the other hand, he narrated that stakeholder society would approximate the non-economist view of what may appear as â€Å"oblivious to redistributional issues† narrow-minded- or â€Å"out of touch with social realities† as consequences of limiting corporate governance to shareholders’ value maximization. To support the stakeholder society concept, he cited a prevalent view in politics and public opinion that â€Å"corporations should serve a larger purpose and â€Å"be responsible† that is they should reach out to other stakeholders not only to shareholders† (Tirole, 1996) (Paraphrasing made). In discussing therefore â€Å"The Corporate Social Responsibility View†, Tirole (1996) discussed ways under which an â€Å"economist would rephrase the position of the proponents of the stakeholder society† as could recommending â€Å"that management and directors internalize the externalities that their decision impose on various groups.† He thus cited examples of such externalities and concomitant duties toward stakeholders, according to the proponents of the stakeholder society. One is the duties toward employees where he argued that â€Å"firms should refrain from laying off workers when they make