Category: Economics

➤ Why do Veblen goods cause higher demand when prices rise?
Veblen goods attract higher demand as price rises because consumers treat price as a status signal. Luxury items like designer handbags, watches, and cars can become more desirable when more expensive. The prestige or snob effect can dominate usual substitution behavior and raise quantity demanded.

Critically discuss the characteristics of a developmental state With appropriate public sector examples

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Instructions: In the Aggregate Demand/Aggregate Supply model, use the directional arrow tool provided

➤ Why would Chair Powell raise the discount rate from 3% to 5%?
Powell would raise the discount rate to cool an overheating economy and rein in inflation. Increasing the rate signals a tighter monetary policy stance, discourages excessive borrowing and speculative activity, and anchors inflation expectations. The move supports price stability, even if it raises short-term unemployment and slows growth temporarily.

➤ Why does the marginal product of labor usually fall as more workers are hired?
The marginal product of labor often falls because other inputs like machines, tools, or workspace remain fixed. As you add workers, they share limited capital and may crowd one another. This reduces the extra output each new worker can produce, which is the law of diminishing marginal returns in the short run.