Author Question: What is meant by capital stock? What will be an ideal response?[br][br][b][color=#9E3EA8]Question ... (Read 78 times)

Anajune7 · **on:** Jun 29, 2018

What is meant by capital stock?

What will be an ideal response?

Question 2

What are sticky prices, and how can contracts make them sticky?

What will be an ideal response?

succesfull · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

For a single firm, its capital stock is equal to the current market value of the firm's plant, equipment, inventories, and intangible assets.

Answer to Question 2

Prices or wages are said to be sticky when they do not respond quickly to changes in demand or supply. Contracts are legal agreements between the firm and another party that establishes a particular price to be paid over a period of time. For example, a union contract is a legal agreement between the firm and the union that workers are to be paid a certain wage. If conditions change over the contract period, the firm still must pay the wage agreed upon in the contract. That can make this firm's wages sticky. Firms also buy raw materials on contract. This fixes the price at which the firm buys the raw material over the contract period, so it also becomes a sticky price.